1 Profitable Stock with Exciting Potential and 2 We Ignore

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”.

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Not all profitable companies are created equal, and that’s why we built StockStory – to help you find the ones that truly shine bright. That said, here is one profitable company that leverages its financial strength to beat the competition and two that may face some trouble.

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Trailing 12-Month GAAP Operating Margin: 9.9%

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With the first products sold out of the trunk of the founder’s car, Herbalife (NYSE:HLF) today offers a portfolio of shakes, supplements, personal care products, and weight management programs to help customers reach their nutritional and fitness goals.

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Why Are We Hesitant About HLF?

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1. Falling unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy

2. Anticipated sales growth of 3.6% for the next year implies demand will be shaky

3. Issuance of new shares over the last three years caused its earnings per share to fall by 17.3% annually, even worse than its revenue declines

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Herbalife is trading at $9.21 per share, or 4.3x forward P/E. Read our free research report to see why you should think twice about including HLF in your portfolio, it’s free.

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Trailing 12-Month GAAP Operating Margin: 18.3%

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Formerly known as Hotshine Holdings, Mister Car Wash (NYSE:MCW) offers car washes across the United States through its conveyorized service.

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Why Do We Pass on MCW?

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1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience

2. Cash-burning history makes us doubt the long-term viability of its business model

3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

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Mister Car Wash’s stock price of $5.37 implies a valuation ratio of 11.5x forward P/E. Dive into our free research report to see why there are better opportunities than MCW.

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Trailing 12-Month GAAP Operating Margin: 13%

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Founded in the 1950s as Microwave Associates, a communications supplier to the US Army Signal Corp, today MACOM Technology Solutions (NASDAQ: MTSI) is a provider of analog chips used in optical, wireless, and satellite networks.

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Why Are We Positive On MTSI?

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1. Impressive 15.8% annual revenue growth over the last two years indicates it’s winning market share this cycle

2. Projected revenue growth of 18.4% for the next 12 months is above its two-year trend, pointing to accelerating demand

3. Earnings per share grew by 41.3% annually over the last five years, massively outpacing its peers