2 Profitable Stocks with Exciting Potential and 1 We Question

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".

Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here are two profitable companies that balance growth and profitability and one that may struggle to keep up.

One Stock to Sell:

Smith & Wesson (SWBI)

Trailing 12-Month GAAP Operating Margin: 4.6%

With a history dating back to 1852, Smith & Wesson (NASDAQ:SWBI) is a firearms manufacturer known for its handguns and rifles.

Why Do We Think SWBI Will Underperform?

1. Products and services aren't resonating with the market as its revenue declined by 6.6% annually over the last five years
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. Eroding returns on capital suggest its historical profit centers are aging

Smith & Wesson is trading at $9.74 per share, or 7.8x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SWBI.

Two Stocks to Watch:

OSI Systems (OSIS)

Trailing 12-Month GAAP Operating Margin: 12.7%

With security scanners deployed at airports and borders worldwide and patient monitors used in hospitals across the globe, OSI Systems (NASDAQ:OSIS) designs and manufactures specialized electronic systems for security screening, patient monitoring, and optoelectronic applications.

Why Could OSIS Be a Winner?

1. Impressive 15.8% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Operating margin expanded by 2.6 percentage points over the last five years as it scaled and became more efficient
3. Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 22.7% annually

OSI Systems’s stock price of $235.45 implies a valuation ratio of 23.3x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Verra Mobility (VRRM)

Trailing 12-Month GAAP Operating Margin: 15.6%

Aiming to wrap technology and data around a historically manual and paper-based industry, Verra Mobility (NYSE:VRRM) is a leading provider of smart mobility technology to address tolls and violations, title and registration services, as well as safety and traffic enforcement.

Why Is VRRM a Top Pick?

1. Annual revenue growth of 15.7% over the last five years was superb and indicates its market share increased during this cycle
2. Superior product capabilities and pricing power lead to a best-in-class gross margin of 62.2%
3. Strong free cash flow margin of 20.2% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business

At $24.26 per share, Verra Mobility trades at 17.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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