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 is one profitable company that balances growth and profitability and two that may struggle to keep up.
Two Stocks to Sell:
Chemed (CHE)
Trailing 12-Month GAAP Operating Margin: 12.9%
With a unique business model combining end-of-life care and household services, Chemed (NYSE: CHE) operates two distinct businesses: VITAS, which provides hospice care for terminally ill patients, and Roto-Rooter, which offers plumbing and water restoration services.
Why Are We Cautious About CHE?
- Sales trends were unexciting over the last five years as its 4% annual growth was below the typical healthcare company
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 2.8% annually
- Waning returns on capital imply its previous profit engines are losing steam
Chemed’s stock price of $446.20 implies a valuation ratio of 17.6x forward P/E. Dive into our free research report to see why there are better opportunities than CHE.
Markel Group (MKL)
Trailing 12-Month GAAP Operating Margin: 17%
Often referred to as a "mini Berkshire Hathaway" for its three-engine business model of insurance, investments, and wholly-owned businesses, Markel Group (NYSE: MKL) is a specialty insurance company that underwrites complex risks, manages investment portfolios, and owns a diverse collection of operating businesses.
Why Does MKL Give Us Pause?
- Large revenue base constrains its growth potential, as seen in its unexciting 1.3% annualized increases in net premiums earned over the last two years fell below our expectations for the insurance sector
- Estimated sales decline of 3.4% for the next 12 months implies a challenging demand environment
- Costs have risen faster than its revenue over the last five years, causing its pre-tax profit margin to decline by 22.1 percentage points
Markel Group is trading at $1,812 per share, or 1.2x forward P/B. Read our free research report to see why you should think twice about including MKL in your portfolio.
One Stock to Watch:
Cadence Design Systems (CDNS)
Trailing 12-Month GAAP Operating Margin: 28.3%
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 Do We Watch CDNS?
- Software is difficult to replicate at scale and leads to a best-in-class gross margin of 87.1%
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Strong free cash flow margin of 25.9% enables it to reinvest or return capital consistently
At $390.35 per share, Cadence Design Systems trades at 16.9x forward price-to-sales. Is now a good 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 (+1,326% between June 2020 and June 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.
