Yahoo Finance

Companies with solid operating margins have a competitive edge, allowing them to reinvest for sustainable expansion. The best of these businesses balance profitability with reinvestment, setting themselves up for long-term success.

Even among profitable businesses, only a select few truly maximize their potential - and StockStory is here to help you find them. That said, here are three profitable companies that leverage their financial strength to beat the competition.

Adobe (ADBE)

Trailing 12-Month GAAP Operating Margin: 36.3%

One of the most well-known Silicon Valley software companies around, Adobe (NASDAQ:ADBE) is a leading provider of software as service in the digital design and document management space.

Why Are We Positive On ADBE?

1. Prominent and differentiated software culminates in a best-in-class gross margin of 89.2%

2. Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 36.3%, and its profits increased over the last year as it scaled

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

At $358.84 per share, Adobe trades at 6.4x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.

Xylem (XYL)

Trailing 12-Month GAAP Operating Margin: 11.8%

Formed through a spinoff, Xylem (NYSE:XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.

Why Is XYL on Our Radar?

1. Impressive 24.5% annual revenue growth over the last two years indicates it’s winning market share this cycle

2. Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 9.3% over the past two years

3. Earnings per share grew by 16.5% annually over the last two years and trumped its peers

Xylem’s stock price of $115 implies a valuation ratio of 23.9x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.

OSI Systems (OSIS)

Trailing 12-Month GAAP Operating Margin: 12.3%

With security scanners deployed at airports and borders worldwide and patient monitors used in hospitals across the globe, OSI Systems (NASDAQ:OSIS) designs and manufactures specialized electronic systems for security screening, patient monitoring, and optoelectronic applications.

Why Does OSIS Stand Out?

1. Annual revenue growth of 17.7% over the past two years was outstanding, reflecting market share gains this cycle

2. Adjusted operating margin improvement of 1.8 percentage points over the last five years demonstrates its ability to scale efficiently

3. Earnings per share have massively outperformed its peers over the last two years, increasing by 26% annually