Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 generates reliable profits without sacrificing growth and two that may face some trouble.
Two Financials Stocks to Sell:
Stifel (SF)
Trailing 12-Month GAAP Operating Margin: 17.8%
Tracing its roots back to 1890 when the firm was established in St. Louis, Stifel Financial (NYSE: SF) is a financial services firm that provides wealth management, investment banking, and institutional brokerage services to individuals, corporations, and institutions.
Why Are We Hesitant About SF?
- Sales trends were unexciting over the last five years as its 7.5% annual growth was below the typical financials company
- Incremental sales over the last two years were less profitable as its 4.1% annual earnings per share growth lagged its revenue gains
- Muted 4% annual book value per share growth over the last two years shows its capital generation lagged behind its financials peers
Stifel is trading at $114.92 per share, or 13.8x forward P/E. Check out our free in-depth research report to learn more about why SF doesn’t pass our bar.
Capital Southwest (CSWC)
Trailing 12-Month GAAP Operating Margin: 58.3%
Originally founded in 1961 as a venture capital investor that helped launch Texas Instruments, Capital Southwest (NASDAQ: CSWC) is a business development company that provides debt and equity financing to middle-market companies primarily in the United States.
Why Does CSWC Give Us Pause?
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
Capital Southwest’s stock price of $22.12 implies a valuation ratio of 9.4x forward P/E. If you’re considering CSWC for your portfolio, see our FREE research report to learn more.
One Financials Stock to Buy:
Enova (ENVA)
Trailing 12-Month GAAP Operating Margin: 11.9%
Pioneering online lending since 2004 with a massive database of over 65 terabytes of customer behavior data, Enova International (NYSE: ENVA) provides online financial services including installment loans and lines of credit to non-prime consumers and small businesses in the United States and Brazil.
Why Are We Bullish on ENVA?
- Market share has increased this cycle as its 23.4% annual revenue growth over the last two years was exceptional
- Share repurchases over the last two years enabled its annual earnings per share growth of 26.8% to outpace its revenue gains
- Annual book value per share growth of 25.4% over the past five years was outstanding, reflecting strong capital accumulation this cycle
At $121.96 per share, Enova trades at 9.6x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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