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 balances growth and profitability and two that may face some trouble.
Two Stocks to Sell:
Starbucks (SBUX)
Trailing 12-Month GAAP Operating Margin: 7.8%
Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ:SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.
Why Is SBUX Not Exciting?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Projected sales decline of 1.6% for the next 12 months points to a tough demand environment ahead
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 3 percentage points
Starbucks’s stock price of $107.72 implies a valuation ratio of 36.8x forward P/E. Check out our free in-depth research report to learn more about why SBUX doesn’t pass our bar.
Baker Hughes (BKR)
Trailing 12-Month GAAP Operating Margin: 12%
Tracing lineage to a 1907 cable tool drill bit patent, Baker Hughes (NASDAQ:BKR) provides equipment and services for oil and gas drilling, production, and transport.
Why Are We Hesitant About BKR?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 6.3% for the last five years
- Costly operations and weak unit economics result in an inferior gross margin of 22.3% that must be offset through higher production volumes
At $64.96 per share, Baker Hughes trades at 23x forward P/E. To fully understand why you should be careful with BKR, check out our full research report (it’s free).
One Stock to Watch:
Fastenal (FAST)
Trailing 12-Month GAAP Operating Margin: 20.3%
Founded in 1967, Fastenal (NASDAQ:FAST) provides industrial and construction supplies, including fasteners, tools, safety products, and many other product categories to businesses globally.
Why Does FAST Catch Our Eye?
- Superior product capabilities and pricing power are reflected in its best-in-class gross margin of 45.4%
- Highly efficient business model is illustrated by its impressive 20.4% operating margin
- Free cash flow margin grew by 5.1 percentage points over the last five years, giving the company more chips to play with
Fastenal is trading at $50.99 per share, or 38.4x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. 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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.