They’re calling the past 10 years of the stock market the “lost decade,” referring to the fact that the major indexes are now at the same price levels seen 10 years ago. Fair enough. Just don’t be fooled into thinking every single company out there has been spinning its wheels since 2001. Here are three companies well into record-breaking profitability despite the nagging economic woes.

1. Walgreen (NYSE: WAG)
The $2.4 billion in profits this drug store chain earned in the past four quarters easily trumps the $880 million earned in the same four-quarter stretch ending in mid-2001. That’s a 171% improvement through a couple of tough recessions.

The secret of Walgreen’s success really isn’t much of a secret. Successful expansion from just over 3,000 stores in 2001 to 7,650 now was the result of well-planned, affordable growth and the avoidance of too much (relatively) long-term debt.

This stands in sharp contrast to competitor Rite-Aid (NYSE: RAD), which has been teetering on the edge of bankruptcy, thanks to almost-crippling debt levels. In fact, there’s a great lesson to be learned in how these two seemingly similar drug retailers can produce such different results.

One of the common concerns investors pose about Walgreen, and most retailers for that matter, is thin margins. The company’s net profit during the past 12 months is a very modest 3.4% of revenue.

Were Walgreen a tech company, this profit margin simply wouldn’t be acceptable. But the consumer staples business isn’t built on profit margins — it’s built on cash flow, or sales volume. If a company sells enough of anything fast enough, it doesn’t need huge margins. The trouble Rite-Aid ran into by taking on a great deal of debt was simply that an already-narrow profit margin left little to nothing left for the bottom line once loan interest payments were paid. Walgreens was able to grow its top and bottom line together because it only carries a minor amount of debt.

2. Capital One Financial (NYSE: COF)
Really? The credit card company that largely built its business on subprime borrowers is now generating more profits than it ever has before? In a word, yes.

The 2008 financial meltdown hurt Capital One to be sure. The company’s then-record-breaking $2.4 billion annualized earnings peak from late 2007 was whittled down to a $932 million loss in its worst four-quarter span from late 2008 to early 2009. In the past 12 months though, the company has cleared $3.5 billion in profit.

This banking organization was able to quickly shrug off the nagging loan losses that the likes of Bank of America (NYSE: BAC) can’t, primarily because Capital One wasn’t as reliant on the subprime market as many assumed — it’s actually got a strong deposit/checking account business too. Of course, the improving quality and size of its loan and credit card portfolio certainly hasn’t hurt.

If the company’s core really is credit cards though, investors can reasonably expect more record-breaking earnings ahead. Last month’s credit card purchase volume in the United States was 10.7% stronger than it was in June of 2010, and total credit card debt in the United States increased by an annualized 5.1% in May. It was only the second increase in 28 months. Consumers may well be getting back into a credit-hungry mood.

3. Wal-Mart (NYSE: WMT)
Complain all you want to about the stock going nowhere since 2001, but don’t blame the company — it’s done its part. The $15.5 billion the world’s largest retailer earned in the past four quarters completely trounces the $6.4 billion in profits this discount chain cleared in the same four quarters ending in the middle of 2001. In fact, only once in that 10 year timeframe has trailing 12-month revenue fallen (mid-2009), and it’s more than made up for the dip since then.

At the heart of Wal-Mart’s success is the pricing power that comes with sheer size. It’s the world’s largest retailer, and as such, it’s also the world’s biggest single wholesale buyer of everything from toys to food to apparel. Therefore, it can afford to call the shots as a buyer, and it can afford to beat its competitions’ prices — or even take a loss — as a seller.

So why has the stock been stagnant? Because investors ran it up to 45 times its annual earnings in 2000, which was a valuation the company never had a prayer of justifying anytime in the foreseeable future. The stock is now priced at a palatable 12.6 times its trailing 12-month earnings now though, so we may finally be at the point where shares and profits start to move in tandem again.

Action to take –> Were it just one or two strong quarters of earnings growth, we could dismiss these numbers as a stroke of luck. But these three companies are posting record profits after the worst 10-year stretch the global economy has seen in the modern era. This is nothing to chalk up to luck. More important, the qualities that led them to record earnings now are still in place.

While any of these stocks could be decent ways to round out a long-term portfolio, of the three, Capital One Financial may be the most compelling. It’s sporting a single-digit P/E ratio on a trailing as well as a forward-looking basis. It’s also getting no respect from analysts, despite blowing earnings estimates out of the water in each of its past four quarters. A case for at least 40% upside could me made based on the current earnings forecasts alone, which we already know have been well short of actual results in the past.

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