While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies — as Jeff Bezos said, “Your margin is my opportunity”.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here are two profitable companies that balance growth and profitability and one that may face some trouble.
One Stock to Sell:
First Watch (FWRG)
Trailing 12-Month GAAP Operating Margin: 2.1%
Based on a nautical reference to the first work shift aboard a ship, First Watch (NASDAQ:FWRG) is a chain of breakfast and brunch restaurants whose menu is heavily-focused on eggs and griddle items such as pancakes.
Why Do We Think Twice About FWRG?
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
First Watch is trading at $12.49 per share, or 55x forward P/E. If you’re considering FWRG for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Match Group (MTCH)
Trailing 12-Month GAAP Operating Margin: 28.2%
Originally started as a dial-up service before widespread internet adoption, Match (NASDAQ:MTCH) was an early innovator in online dating and today has a portfolio of apps including Tinder, Hinge, Archer, and OkCupid.
Why Could MTCH Be a Winner?
- Marketing expenses show it saves money by shying from over-the-top promotions to win new users
- Highly efficient business model is illustrated by its impressive 37% EBITDA margin, and its profits increased over the last few years as it scaled
- Robust free cash flow margin of 29.4% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
Match Group’s stock price of $39.74 implies a valuation ratio of 8.9x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Arthur J. Gallagher (AJG)
Trailing 12-Month GAAP Operating Margin: 12.6%
Founded in 1927 and operating in approximately 130 countries through direct operations and correspondent networks, Arthur J. Gallagher (NYSE:AJG) provides insurance brokerage, reinsurance, consulting, and third-party claims settlement services to businesses and individuals worldwide.
Why Should You Buy AJG?
- Annual revenue growth of 20% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 18.5% annually
- AJG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $259.00 per share, Arthur J. Gallagher trades at 17.6x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.