2 Profitable Stocks with Competitive Advantages and 1 We Find Risky

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.

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are two profitable companies that generate reliable profits without sacrificing growth and one that may struggle to keep up.

One Stock to Sell:

Universal Health Services (UHS)

Trailing 12-Month GAAP Operating Margin: 11.5%

With a network spanning 39 states and three countries, Universal Health Services (NYSE:UHS) operates acute care hospitals and behavioral health facilities across the United States, United Kingdom, and Puerto Rico.

Why Are We Wary of UHS?

1. Lagging comparable store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.2% for the last five years

Universal Health Services is trading at $151.94 per share, or 6.4x forward P/E. If you’re considering UHS for your portfolio, see our FREE research report to learn more.

Two Stocks to Watch:

O'Reilly (ORLY)

Trailing 12-Month GAAP Operating Margin: 19.6%

Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ:ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.

Why Are We Backing ORLY?

1. Same-store sales growth averaged 4.4% over the past two years, showing it’s bringing new and repeat shoppers into its stores
2. Disciplined cost controls and effective management resulted in a strong two-year operating margin of 19.4%
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures

At $88.53 per share, O'Reilly trades at 26.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

The Ensign Group (ENSG)

Trailing 12-Month GAAP Operating Margin: 8.2%

Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ:ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.

Why Do We Like ENSG?

1. Market share has increased this cycle as its 19.3% annual revenue growth over the last two years was exceptional
2. Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
3. Earnings per share grew by 16.4% annually over the last five years, massively outpacing its peers

The Ensign Group’s stock price of $168 implies a valuation ratio of 22.1x forward P/E. 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 (+1,326% 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.