While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here is one profitable company that generates reliable profits without sacrificing growth and two best left off your watchlist.

Two Stocks to Sell:

Zoom (ZM)

Trailing 12-Month GAAP Operating Margin: 17.4%

Started by Eric Yuan who once ran engineering for Cisco’s video conferencing business, Zoom (NASDAQ:ZM) offers an easy to use, cloud-based platform for video conferencing, audio conferencing and screen sharing.

Why Do We Think Twice About ZM?

Underwhelming ARR growth of 3.1% over the last year suggests the company faced challenges in acquiring and retaining long-term customers Estimated sales growth of 2.5% for the next 12 months implies demand will slow from its three-year trend Free cash flow margin is forecasted to shrink by 5 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors

Zoom is trading at $78.50 per share, or 5.2x forward price-to-sales. To fully understand why you should be careful with ZM, check out our full research report (it’s free).

YETI (YETI)

Trailing 12-Month GAAP Operating Margin: 13.4%

Founded by two brothers from Texas, YETI (NYSE:YETI) specializes in durable outdoor goods including coolers, drinkware, and other gear tailored to adventure enthusiasts.

Why Does YETI Fall Short?

Annual revenue growth of 7.1% over the last two years was below our standards for the consumer discretionary sector Anticipated sales growth of 6.2% for the next year implies demand will be shaky Eroding returns on capital suggest its historical profit centers are aging

YETI’s stock price of $28.82 implies a valuation ratio of 9.9x forward P/E. If you’re considering YETI for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

Alphabet (GOOGL)

Trailing 12-Month GAAP Operating Margin: 32.7%

Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ:GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.

Why Are We Bullish on GOOGL?

Alphabet’s dominant Google Search sits on the pantheon of the best businesses ever. This is reflected in its robust long-term revenue growth and elite operating margin. The company’s profit margins have become even higher over time, speaking to its scale advantages and operating efficiency not only in its core Search business but also in Google Cloud Platform and YouTube. Revenue growth and increasing operating margins are the key ingredients for strong EPS growth. Google has these, and when also factoring in its share repurchases, you can see why EPS has exploded over the long term.

Story Continues

At $163.84 per share, Alphabet trades at 18.1x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.

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