Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here are two profitable companies that balance growth and profitability and one that may struggle to keep up.
One Stock to Sell:
Quest Resource (QRHC)
Trailing 12-Month GAAP Operating Margin: 1%
Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ:QRHC) is a provider of waste and recycling services.
Why Do We Pass on QRHC?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.8% annually over the last two years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $1.38 per share, Quest Resource trades at 7.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including QRHC in your portfolio.
Two Stocks to Buy:
Incyte (INCY)
Trailing 12-Month GAAP Operating Margin: 30.6%
Founded in 1991 and evolving from a genomics research firm to a commercial-stage drug developer, Incyte (NASDAQ:INCY) is a biopharmaceutical company that discovers, develops, and commercializes proprietary therapeutics for cancer and inflammatory diseases.
Why Is INCY a Good Business?
- Impressive 22.8% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Free cash flow margin increased by 12.6 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Returns on capital are climbing as management makes more lucrative bets
Incyte is trading at $128.89 per share, or 54.6x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
HCI Group (HCI)
Trailing 12-Month GAAP Operating Margin: 48.4%
Starting as a Florida "take-out" insurer that assumed policies from the state-backed Citizens Property Insurance Corporation, HCI Group (NYSE:HCI) provides property and casualty insurance, primarily homeowners coverage, while leveraging proprietary technology to improve underwriting and claims processing.
Why Do We Love HCI?
- Strong 15.5% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 36.3% over the last two years outstripped its revenue performance
- Impressive 42.4% annual book value per share growth over the last two years indicates it’s building equity value this cycle
HCI Group’s stock price of $189.88 implies a valuation ratio of 1.9x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.