Every company operates differently. A great company is one that can operate with a lean platform. That means they may not be in the business of acquiring physical goods that then have to be manufactured.
Ideally, investors should see the best returns with a company that has a high profit margin, and low cost to acquire that revenue in the first place. Companies with that structure that lead their industry should deliver great returns over time.
One potential winner is Airbnb (ABNB). The company operates a platform that matches the supply and demand for space to rent. With consumer demand for travel slowing, the company has lowered is guidance.
However, shares trade at 15 times earnings. And since Airbnb doesn’t operate properties themselves like a hotel chain, they’re in a strong position to prosper over time, even if short-term conditions can get rough.
That’s likely also why the company sports a hefty 46% profit margin, greater than the returns in the hotel space.
Action to take: With shares knocked back down to their lows from last year, the stock may be in a strong position for a short-term rally over the next few months.
For traders, the November $120 calls, last trading for about $6.40, could see mid-to-high double-digit returns on a bounce higher for the stock.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.