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”.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here is one profitable company that leverages its financial strength to beat the competition and two best left off your watchlist.
Two Stocks to Sell:
Etsy (ETSY)
Trailing 12-Month GAAP Operating Margin: 14.3%
Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NYSE: ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.
Why Does ETSY Fall Short?
- Active Buyers have declined by 1.7% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
- Estimated sales decline of 2.3% for the next 12 months implies a challenging demand environment
- Performance over the past three years shows its incremental sales were less profitable as its earnings per share were flat
Etsy is trading at $65.99 per share, or 11.6x forward EV/EBITDA. Read our free research report to see why you should think twice about including ETSY in your portfolio.
Zumiez (ZUMZ)
Trailing 12-Month GAAP Operating Margin: 1.8%
With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ: ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.
Why Do We Steer Clear of ZUMZ?
- Recent store closures reflect a shift toward streamlining existing locations to maximize efficiency
- Modest revenue base of $929.1 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- ROIC of 3.1% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Zumiez’s stock price of $25.28 implies a valuation ratio of 26.9x forward P/E. If you’re considering ZUMZ for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Johnson Controls (JCI)
Trailing 12-Month GAAP Operating Margin: 11.4%
Founded after patenting the electric room thermostat, Johnson Controls (NYSE: JCI) specializes in building products and technology solutions, including HVAC systems, fire and security systems, and energy storage.
Why Could JCI Be a Winner?
- Gross margin of 32.9% is reasonable for the industry and allows for steady investments in marketing and R&D
- Performance over the past two years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin jumped by 6.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $138.64 per share, Johnson Controls trades at 26x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
