Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two that may face some trouble.
Two Stocks to Sell:
BlackLine (BL)
Trailing 12-Month GAAP Operating Margin: 3.9%
Born from the vision to eliminate tedious manual spreadsheet work for accountants, BlackLine (NASDAQ: BL) provides cloud-based software that automates and streamlines financial close, intercompany accounting, and invoice-to-cash processes for accounting departments.
Why Do We Think BL Will Underperform?
- Products, pricing, or go-to-market strategy may need some adjustments as its 8.5% average billings growth over the last year was weak
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
BlackLine is trading at $26.97 per share, or 2.4x forward price-to-sales. Check out our free in-depth research report to learn more about why BL doesn’t pass our bar.
Macy's (M)
Trailing 12-Month GAAP Operating Margin: 4.6%
With a storied history that began with its 1858 founding, Macy’s (NYSE: M) is a department store chain that sells clothing, cosmetics, accessories, and home goods.
Why Are We Out on M?
- Store closures and disappointing same-store sales suggest demand is sluggish and it’s rightsizing its operations
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Earnings per share have contracted by 20.7% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Macy’s stock price of $22.48 implies a valuation ratio of 10.1x forward P/E. To fully understand why you should be careful with M, check out our full research report (it’s free).
One Stock to Watch:
Arlo Technologies (ARLO)
Trailing 12-Month GAAP Operating Margin: 2.9%
Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.
Why Does ARLO Stand Out?
- Solid 8.4% annual revenue growth over the last five years indicates its offerings solve complex business issues
- Additional sales over the last two years increased its profitability as the 54% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin jumped by 15.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $13.27 per share, Arlo Technologies trades at 17.1x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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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.
