2 Profitable Stocks with Exciting Potential and 1 We Avoid

Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.

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 generate reliable profits without sacrificing growth and one that may struggle to keep up.

One Stock to Sell:

Academy Sports (ASO)

Trailing 12-Month GAAP Operating Margin: 8.3%

Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ:ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.

Why Does ASO Give Us Pause?

1. Sales tumbled by 2.4% annually over the last three years, showing consumer trends are working against its favor
2. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 3.9 percentage points

Academy Sports’s stock price of $61.12 implies a valuation ratio of 9.6x forward P/E. Dive into our free research report to see why there are better opportunities than ASO.

Two Stocks to Watch:

Vita Coco (COCO)

Trailing 12-Month GAAP Operating Margin: 13.5%

Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ:COCO) offers coconut water products that are a natural way to quench thirst.

Why Will COCO Outperform?

1. Stellar 9.9% growth in unit sales over the past two years demonstrates the high demand for its products
2. Earnings per share grew by 70.9% annually over the last three years, massively outpacing its peers
3. ROIC punches in at 36.9%, illustrating management’s expertise in identifying profitable investments, and its rising returns show it’s making even more lucrative bets

At $53.72 per share, Vita Coco trades at 34.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

NMI Holdings (NMIH)

Trailing 12-Month GAAP Operating Margin: 74.8%

Founded in the aftermath of the 2008 housing crisis to bring new capacity to the mortgage insurance market, NMI Holdings (NASDAQ:NMIH) provides mortgage insurance that protects lenders against losses when homebuyers default on their mortgage loans.

Why Do We Like NMIH?

1. Pre-tax profit margin expanded by 20.4 percentage points over the last five years as it scaled and became more efficient
2. Annual book value per share growth of 16.1% over the last five years was superb and indicates its capital strength increased during this cycle
3. Industry-leading 17.4% return on equity demonstrates management’s skill in finding high-return investments

NMI Holdings is trading at $39.75 per share, or 1x forward P/B. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.