Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
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 best left off your watchlist.
Two Stocks to Sell:
Seagate Technology (STX)
Trailing 12-Month GAAP Operating Margin: 20.8%
The developer of the original 5.25inch hard disk drive, Seagate (NASDAQ:STX) is a leading producer of data storage solutions, including hard drives and Solid State Drives (SSDs) used in PCs and data centers.
Why Does STX Give Us Pause?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.8% annually over the last five years
- Gross margin of 30.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 9.5% for the last two years
Seagate Technology is trading at $167.50 per share, or 17x forward P/E. Check out our free in-depth research report to learn more about why STX doesn’t pass our bar.
Watsco (WSO)
Trailing 12-Month GAAP Operating Margin: 10.3%
Originally a manufacturing company, Watsco (NYSE:WSO) today only distributes air conditioning, heating, and refrigeration equipment, as well as related parts and supplies.
Why Are We Cautious About WSO?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its stores
- Earnings per share fell by 2.2% annually over the last two years while its revenue grew, partly because it diluted shareholders
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $402.38 per share, Watsco trades at 27.4x forward P/E. Dive into our free research report to see why there are better opportunities than WSO.
One Stock to Watch:
Iridium (IRDM)
Trailing 12-Month GAAP Operating Margin: 25.4%
With a constellation of 66 low-earth orbit satellites providing coverage to every inch of the planet, Iridium Communications (NASDAQ:IRDM) operates a global satellite network that provides voice and data services to customers in remote areas where traditional telecommunications are unavailable.
Why Are We Positive On IRDM?
- Number of subscribers has surged, pointing to elevated demand
- Share repurchases over the last two years enabled its annual earnings per share growth of 227% to outpace its revenue gains
- Robust free cash flow margin of 36.4% gives it many options for capital deployment
Iridium’s stock price of $25.05 implies a valuation ratio of 19.1x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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