Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
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 generates reliable profits without sacrificing growth and two best left off your watchlist.
Two Stocks to Sell:
Burlington (BURL)
Trailing 12-Month GAAP Operating Margin: 7%
Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE: BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.
Why Are We Wary of BURL?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 7.9% over the last five years was below our standards for the consumer retail sector
- Free cash flow margin dropped by 4 percentage points over the last year, implying the company became more capital intensive as competition picked up
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Burlington is trading at $225.79 per share, or 24x forward price-to-earnings. If you’re considering BURL for your portfolio, see our FREE research report to learn more.
Polaris (PII)
Trailing 12-Month GAAP Operating Margin: 3.2%
Founded in 1954, Polaris (NYSE: PII) designs and manufactures high-performance off-road vehicles, snowmobiles, and motorcycles.
Why Do We Steer Clear of PII?
- Products and services have few die-hard fans as sales have declined by 11.6% annually over the last two years
- Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 17.2% annually
- Eroding returns on capital suggest its historical profit centers are aging
Polaris’s stock price of $33.96 implies a valuation ratio of 22.6x forward price-to-earnings. To fully understand why you should be careful with PII, check out our full research report (it’s free).
One Stock to Watch:
Gartner (IT)
Trailing 12-Month GAAP Operating Margin: 18.4%
With over 2,500 research experts guiding organizations through complex technology landscapes, Gartner (NYSE: IT) provides research, advisory services, and conferences that help executives make better decisions about technology and other business priorities.
Why Should IT Be on Your Watchlist?
- Constant currency growth averaged 7.3% over the past two years, showing it can expand globally regardless of the macroeconomic environment
- Robust free cash flow margin of 20.8% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
- Improving returns on capital reflect management’s ability to monetize investments
At $421.20 per share, Gartner trades at 32.3x forward price-to-earnings. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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.
