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 are two profitable companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
RLI (RLI)
Trailing 12-Month GAAP Operating Margin: 32%
Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI (NYSE:RLI) is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.
Why Are We Wary of RLI?
- Expenses have increased as a percentage of revenue over the last five years as its pre-tax profit margin fell by 5.2 percentage points
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 9.1% annually
- 5% annual book value per share growth over the last two years was slower than its insurance peers
RLI’s stock price of $60.43 implies a valuation ratio of 3.2x forward P/B. Dive into our free research report to see why there are better opportunities than RLI.
Two Stocks to Watch:
Veeva Systems (VEEV)
Trailing 12-Month GAAP Operating Margin: 29.9%
Originally named "Verticals onDemand" before rebranding in 2009, Veeva Systems (NYSE:VEEV) provides cloud software, data solutions, and consulting services that help life sciences companies develop and bring products to market more efficiently.
Why Could VEEV Be a Winner?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 17.8% over the last year
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Robust free cash flow margin of 47.4% gives it many options for capital deployment
Veeva Systems is trading at $263.14 per share, or 11.2x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Expand Energy (EXE)
Trailing 12-Month GAAP Operating Margin: 28.9%
Rebranded from Chesapeake Energy in 2024 after emerging from bankruptcy, Expand Energy (NASDAQ:EXE) produces natural gas, oil, and natural gas liquids from underground shale formations in Louisiana, Pennsylvania, Ohio, and West Virginia.
Why Do We Love EXE?
- Annual revenue growth of 19.4% over the last five years was superb and indicates its market share increased during this cycle
- Dominant market position is represented by its $12.66 billion in revenue and gives it fixed cost leverage when sales grow
- EBITDA profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
At $88.81 per share, Expand Energy trades at 11.5x forward P/E. Is now the time to initiate a position? 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.