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. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two that may struggle to keep up.
Two Stocks to Sell:
Iridium (IRDM)
Trailing 12-Month GAAP Operating Margin: 26.7%
With a constellation of 66 low-earth orbit satellites providing coverage to every inch of the planet, Iridium Communications (NASDAQ: IRDM) operates a global satellite network that provides voice and data services to customers in remote areas where traditional telecommunications are unavailable.
Why Does IRDM Give Us Pause?
- Estimated sales growth of 1.4% for the next 12 months implies demand will slow from its two-year trend
- 4.8 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Iridium is trading at $17.38 per share, or 14.5x forward P/E. Dive into our free research report to see why there are better opportunities than IRDM.
Telephone and Data Systems (TDS)
Trailing 12-Month GAAP Operating Margin: 2.3%
Operating primarily through its majority-owned subsidiary UScellular and wholly-owned TDS Telecom, Telephone and Data Systems (NYSE: TDS) provides wireless, broadband, video, and voice communications services to 4.6 million wireless and 1.2 million broadband customers across the United States.
Why Is TDS Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.5% annually over the last five years
- Earnings per share have contracted by 17% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- High net-debt-to-EBITDA ratio of 20× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $39.55 per share, Telephone and Data Systems trades at 7.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why TDS doesn’t pass our bar.
One Stock to Buy:
AutoZone (AZO)
Trailing 12-Month GAAP Operating Margin: 19.1%
Aiming to be a one-stop shop for the DIY customer, AutoZone (NYSE: AZO) is an auto parts and accessories retailer that sells everything from car batteries to windshield wiper fluid to brake pads.
Why Should You Buy AZO?
- Store expansion strategy is justified by its healthy same-store sales
- Collection of products is difficult to replicate at scale and results in a best-in-class gross margin of 52.9%
- Healthy operating margin of 19.8% shows it’s a well-run company with efficient processes
AutoZone’s stock price of $3,879 implies a valuation ratio of 24.8x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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