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. That said, here are two profitable companies that balance growth and profitability and one that may face some trouble.
One stock to sell:
Zoom (ZM)
Trailing 12-month GAAP operating margin: 23.7%
Once the verb that defined remote work during the pandemic ("let's Zoom later"), Zoom (NASDAQ: ZM) provides a cloud-based platform for video meetings, phone calls, team chat, and collaboration tools that helps businesses and individuals connect virtually.
Why Should You Sell ZM?
- Customers were hesitant to make long-term commitments to its software as its 5% average ARR growth over the last year was sluggish
- Platform has low switching costs as its net revenue retention rate of 98.5% demonstrates high turnover
- Estimated sales growth of 4.1% for the next 12 months is soft and implies weaker demand
Zoom’s stock price of $88.59 implies a valuation ratio of 5.3x forward price-to-sales. If you’re considering ZM for your portfolio, see our FREE research report to learn more.
Two stocks to watch:
Seagate (STX)
Trailing 12-month GAAP operating margin: 39.6%
One of two remaining major hard drive manufacturers after decades of industry consolidation, Seagate (NASDAQ: STX) manufactures hard disk drives and solid state drives that store data in data centers, cloud systems, and consumer devices.
Why Is STX a Top Pick?
- Annual revenue growth of 37.8% over the last two years was superb and indicates its market share increased during this cycle
- Operating margin improvement of 25.6 percentage points over the last five years demonstrates its ability to scale efficiently
- Free cash flow margin expanded by 20.6 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $476.73 per share, Seagate trades at 11.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Waters Corporation (WAT)
Trailing 12-month GAAP operating margin: 4.7%
Founded in 1958 and pioneering innovations in laboratory analysis for over six decades, Waters (NYSE: WAT) develops and manufactures analytical instruments, software, and consumables for liquid chromatography, mass spectrometry, and thermal analysis used in scientific research and quality testing.
Why Are We Fans of WAT?
- Core business can prosper without any help from acquisitions as its organic revenue growth averaged 8.3% over the past two years
- Notable projected revenue growth of 25.1% for the next 12 months hints at market share gains
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Waters Corporation is trading at $459.90 per share, or 29.6x 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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
