A company with profits isn’t always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are two profitable companies that balance growth and profitability and one that may face some trouble.
One Stock to Sell:
Solventum (SOLV)
Trailing 12-Month GAAP Operating Margin: 9.7%
Founded in 1985, Solventum (NYSE: SOLV) develops, manufactures, and commercializes a portfolio of healthcare products and services addressing critical customer and therapeutic patient needs.
Why Are We Wary of SOLV?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Efficiency has decreased over the last two years as its adjusted operating margin fell by 4.2 percentage points
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 21.9% annually
At $70.81 per share, Solventum trades at 12.5x forward P/E. Dive into our free research report to see why there are better opportunities than SOLV.
Two Stocks to Watch:
Datadog (DDOG)
Trailing 12-Month GAAP Operating Margin: 1.1%
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ: DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.
Why Should You Buy DDOG?
- Ability to secure long-term commitments with customers is evident in its 27.2% ARR growth over the last year
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Strong free cash flow margin of 29.4% enables it to reinvest or return capital consistently
Datadog’s stock price of $114.01 implies a valuation ratio of 12.3x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
LegalZoom (LZ)
Trailing 12-Month GAAP Operating Margin: 5.7%
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.
Why Does LZ Stand Out?
- Subscription Units have increased by an average of 10.5% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin expanded by 13.1 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
LegalZoom is trading at $9.08 per share, or 9.8x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
