2 Profitable Stocks for Long-Term Investors and 1 Facing Challenges

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.

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here are two profitable companies that balance growth and profitability and one that may face some trouble.

One Stock to Sell:

UFP Industries (UFPI)

Trailing 12-Month GAAP Operating Margin: 5.1%

Beginning as a lumber supplier in the 1950s, UFP Industries (NASDAQ:UFPI) is a holding company making building materials for the construction, retail, and industrial sectors.

Why Do We Avoid UFPI?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 3.4% annually over the last five years

2. Sales were less profitable over the last five years as its earnings per share fell by 8.3% annually, worse than its revenue declines

3. Diminishing returns on capital suggest its earlier profit pools are drying up

UFP Industries’s stock price of $78.37 implies a valuation ratio of 14.9x forward P/E. If you’re considering UFPI for your portfolio, see our FREE research report to learn more.

Two Stocks to Watch:

Texas Roadhouse (TXRH)

Trailing 12-Month GAAP Operating Margin: 7.7%

With locations often featuring Western-inspired decor, Texas Roadhouse (NASDAQ:TXRH) is an American restaurant chain specializing in Southern-style cuisine and steaks.

Why Are We Fans of TXRH?

1. Fast expansion of new restaurants to reach markets with few or no locations is justified by its same-store sales growth

2. Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 6.1% over the past two years

3. ROIC punches in at 21.2%, illustrating management’s expertise in identifying profitable investments

Texas Roadhouse is trading at $167.73 per share, or 24x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Matador Resources (MTDR)

Trailing 12-Month GAAP Operating Margin: 32.2%

Operating primarily in the Delaware Basin where multiple oil-bearing layers lie stacked thousands of feet deep, Matador Resources (NYSE:MTDR) explores for, drills, and produces oil and natural gas from underground rock formations in New Mexico and Texas.

Why Will MTDR Outperform?

1. Impressive 29.5% annual revenue growth over the last ten years indicates it’s winning market share this cycle

2. Highly-profitable operating model results in strong unit economics and a best-in-class gross margin of 82.3%

3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends