Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here is one profitable company that generates reliable profits without sacrificing growth and two that may struggle to keep up.
Two Stocks to Sell:
Royal Caribbean (RCL)
Trailing 12-Month GAAP Operating Margin: 26.4%
Established in 1968, Royal Caribbean Cruises (NYSE: RCL) is a global cruise vacation company renowned for its innovative and exciting cruise experiences.
Why Should You Dump RCL?
- Sluggish trends in its passenger cruise days suggest customers aren’t adopting its solutions as quickly as the company hoped
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- ROIC of 3.3% reflects management’s challenges in identifying attractive investment opportunities
Royal Caribbean is trading at $279.16 per share, or 16.3x forward P/E. Dive into our free research report to see why there are better opportunities than RCL.
Marriott Vacations (VAC)
Trailing 12-Month GAAP Operating Margin: 7.5%
Spun off from Marriott International in 1984, Marriott Vacations (NYSE: VAC) is a vacation company providing leisure experiences for travelers around the world.
Why Do We Pass on VAC?
- Sluggish trends in its conducted tours suggest customers aren’t adopting its solutions as quickly as the company hoped
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Marriott Vacations’s stock price of $57.76 implies a valuation ratio of 8.3x forward P/E. Read our free research report to see why you should think twice about including VAC in your portfolio.
One Stock to Buy:
Nvidia (NVDA)
Trailing 12-Month GAAP Operating Margin: 58.8%
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ: NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Why Should You Buy NVDA?
- Annual revenue growth of 104% over the last two years was superb and indicates its market share increased during this cycle
- Share repurchases over the last five years enabled its annual earnings per share growth of 79.1% to outpace its revenue gains
- Robust free cash flow margin of 44.6% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
At $186.45 per share, Nvidia trades at 26.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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