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1 Profitable Stock to Target This Week and 2 We Find Risky
Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here is one profitable company that balances growth and profitability and two that may struggle to keep up.
Two Stocks to Sell:
Golden Entertainment (GDEN)
Trailing 12-Month GAAP Operating Margin: 5.5%
Founded in 2001, Golden Entertainment (NASDAQ:GDEN) is a gaming company operating casinos, taverns, and distributed gaming platforms.
Why Are We Out on GDEN?
- Sales tumbled by 2.5% annually over the last five years, showing consumer trends are working against its favor
- Low free cash flow margin of 4.3% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Golden Entertainment is trading at $27.18 per share, or 33.2x forward P/E. To fully understand why you should be careful with GDEN, check out our full research report (it’s free for active Edge members).
Somnigroup (SGI)
Trailing 12-Month GAAP Operating Margin: 9.3%
Established through the merger of Tempur-Pedic and Sealy in 2012, Somnigroup (NYSE:SGI) is a bedding manufacturer known for its innovative memory foam mattresses and sleep products
Why Do We Avoid SGI?
- Muted 14.3% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Somnigroup’s stock price of $90.79 implies a valuation ratio of 28.2x forward P/E. If you’re considering SGI for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
OSI Systems (OSIS)
Trailing 12-Month GAAP Operating Margin: 12.6%
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 Will OSIS Outperform?
- Annual revenue growth of 16.6% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 23.4% annually, topping its revenue gains
- Free cash flow margin grew by 2.4 percentage points over the last five years, giving the company more chips to play with
At $284.60 per share, OSI Systems trades at 25.5x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.