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. 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:
Keurig Dr Pepper (KDP)
Trailing 12-month GAAP operating margin: 16.2%
Born out of a 2018 merger between Keurig Green Mountain and Dr Pepper Snapple, Keurig Dr Pepper (NASDAQ:KDP) is a consumer staples powerhouse boasting a portfolio of beverages including sodas, coffees, and juices.
Why Is KDP Not Exciting?
- Free cash flow margin didn’t grow over the last year
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Keurig Dr Pepper’s stock price of $36.17 implies a valuation ratio of 14.4x forward P/E. To fully understand why you should be careful with KDP, check out our full research report (it’s free).
Two stocks to buy:
Airbnb (ABNB)
Trailing 12-month GAAP operating margin: 20.8%
Founded by Brian Chesky and Joe Gebbia in their San Francisco apartment, Airbnb (NASDAQ:ABNB) is the world’s largest online marketplace for lodging, primarily homestays.
What Makes ABNB Stand Out?
- Nights and Experiences Booked are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Healthy EBITDA margin of 35.6% shows it’s a well-run company with efficient processes, and its rise over the last few years was fueled by some leverage on its fixed costs
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $167.89 per share, Airbnb trades at 16.7x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Remitly (RELY)
Trailing 12-month GAAP operating margin: 9.5%
With Amazon founder Jeff Bezos as an early investor, Remitly (NASDAQ:RELY) is an online platform that enables consumers to safely and quickly send money globally.
Why Is RELY a Good Business?
- Active Customers have increased by an average of 25.8% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Additional sales over the last three years increased its profitability as the 163% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin grew by 43.1 percentage points over the last few years, giving the company more chips to play with
Remitly is trading at $24.57 per share, or 10.5x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our in-depth 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.