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”.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here are two profitable companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
MDU Resources (MDU)
Trailing 12-Month GAAP Operating Margin: 16.2%
Founded to provide electricity to towns in Minnesota, MDU Resources (NYSE:MDU) provides products and services in the utilities and construction materials industries.
Why Are We Out on MDU?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 20.1% annually over the last five years
- Earnings per share have dipped by 15% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Free cash flow margin shrank by 16.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
MDU Resources is trading at $19.95 per share, or 19.4x forward P/E. If you’re considering MDU for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Cadence Design Systems (CDNS)
Trailing 12-Month GAAP Operating Margin: 30.3%
Powering the chips behind everything from smartphones to AI accelerators for over 35 years, Cadence Design Systems (NASDAQ:CDNS) provides essential computational software, hardware, and intellectual property used by engineers to design and verify advanced electronic systems and semiconductors.
Why Are We Positive on CDNS?
- Billings growth has averaged 17.9% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Software is difficult to replicate at scale and results in a best-in-class gross margin of 86.8%
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
At $339.53 per share, Cadence Design Systems trades at 14x forward price-to-sales. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Wingstop (WING)
Trailing 12-Month GAAP Operating Margin: 27.9%
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ:WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
What Makes WING Stand Out?
- Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
- Highly-profitable franchise model results in strong unit economics and a best-in-class gross margin of 54.1%
- Free cash flow margin grew by 9.5 percentage points over the last year, giving the company more chips to play with
Wingstop’s stock price of $129.05 implies a valuation ratio of 27.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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.