2 Profitable Stocks with Competitive Advantages and 1 We Turn Down

Not all profitable companies are built to last – some rely on outdated models or unsustainable advantages.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.

Not all profitable companies are created equal, and that’s why we built StockStory – to help you find the ones that truly shine bright. Keeping that in mind, here are two profitable companies that balance growth and profitability and one best left off your watchlist.

Trailing 12-Month GAAP Operating Margin: 10.5%

With a tech stack that powers everything from check-in to checkout at some of the world’s top hospitality venues, Agilysys (NASDAQ:AGYS) develops and provides cloud-based and on-premise software solutions for hotels, resorts, casinos, and restaurants to manage operations and enhance guest experiences.

Why Does AGYS Give Us Pause?

1. Sales trends were unexciting over the last five years as its 15.5% annual growth was below the typical software company

2. Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 61.8%

3. Operating margin improvement of 2.2 percentage points over the last year demonstrates its ability to scale efficiently

Agilysys’s stock price of $120.54 implies a valuation ratio of 10.1x forward price-to-sales. Check out our free in-depth research report to learn more about why AGYS doesn’t pass our bar.

Trailing 12-Month GAAP Operating Margin: 1.3%

Moving away from a low margin storage device management chips in one of the biggest semiconductor business model pivots of the past decade, Marvell Technology (NASDAQ: MRVL) is a fabless designer of special purpose data processing and networking chips used by data centers, communications carriers, enterprises, and autos.

Why Does MRVL Stand Out?

1. Market share has increased this cycle as its 20.9% annual revenue growth over the last five years was exceptional

2. Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient

3. Incremental sales over the last five years have been more profitable as its earnings per share increased by 26% annually, topping its revenue gains

At $75.96 per share, Marvell Technology trades at 25x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.

Trailing 12-Month GAAP Operating Margin: 18%

Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.

Why Is WTS a Top Pick?

1. 9.3% annual revenue growth over the last five years surpassed the sector average as its offerings resonated with customers

2. Offerings are difficult to replicate at scale and result in a best-in-class gross margin of 45.9%

3. Share repurchases over the last five years enabled its annual earnings per share growth of 21.8% to outpace its revenue gains

Watts Water Technologies is trading at $263.83 per share, or 24.2x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.

The market’s up big this year – but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking – and paying a fraction of the price. 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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