2 Profitable Stocks with Solid Fundamentals and 1 to Approach with Caution

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. Keeping that in mind, here are two profitable companies that balance growth and profitability and one best left off your watchlist.

One Stock to Sell:

Telephone and Data Systems (TDS)

Trailing 12-Month GAAP Operating Margin: 3.3%

Operating primarily through its majority-owned subsidiary UScellular and wholly-owned TDS Telecom, Telephone and Data Systems (NYSE:TDS) provides wireless, broadband, video, and voice communications services to 4.6 million wireless and 1.2 million broadband customers across the United States.

Why Should You Dump TDS?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.3% annually over the last four years
2. Earnings per share have dipped by 30.7% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. 23× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Telephone and Data Systems’s stock price of $36.69 implies a valuation ratio of 3.1x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than TDS.

Two Stocks to Watch:

Ollie's (OLLI)

Trailing 12-Month GAAP Operating Margin: 11%

Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ:OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.

Why Is OLLI Interesting?

1. Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
2. Comparable store sales rose by 4.3% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
3. Market share is on track to rise over the next 12 months as its 13.5% projected revenue growth implies demand will accelerate from its five-year trend

Ollie's is trading at $107.50 per share, or 28.2x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.

Restaurant Brands (QSR)

Trailing 12-Month GAAP Operating Margin: 28.8%

Formed through a strategic merger, Restaurant Brands International (NYSE:QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.

Why Are We Backing QSR?

1. Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
2. Disciplined cost controls and effective management resulted in a strong two-year operating margin of 29%
3. Robust free cash flow margin of 16.2% gives it many options for capital deployment

At $62.60 per share, Restaurant Brands trades at 17x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

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 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.