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".
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. 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:
CarMax (KMX)
Trailing 12-Month GAAP Operating Margin: 2.5%
Known for its transparent, customer-centric approach and wide selection of vehicles, Carmax (NYSE: KMX) is the largest automotive retailer in the United States.
Why Do We Avoid KMX?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 6%
CarMax is trading at $38.00 per share, or 15.8x forward P/E. To fully understand why you should be careful with KMX, check out our full research report (it’s free).
International Flavors & Fragrances (IFF)
Trailing 12-Month GAAP Operating Margin: 7.4%
Responsible for the scents in your favorite perfumes and the flavors in your daily snacks, International Flavors & Fragrances (NYSE: IFF) creates and manufactures ingredients for food, beverages, personal care products, and pharmaceuticals used in countless consumer goods.
Why Should You Dump IFF?
- Products have few die-hard fans as sales have declined by 4.1% annually over the last three years
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Push for growth has led to negative returns on capital, signaling value destruction
International Flavors & Fragrances’s stock price of $74.22 implies a valuation ratio of 16.9x forward P/E. Dive into our free research report to see why there are better opportunities than IFF.
One Stock to Watch:
MasTec (MTZ)
Trailing 12-Month GAAP Operating Margin: 5%
Involved in the 1996 Olympic Games MasTec (NYSE: MTZ) is an infrastructure construction company that specializes in the telecommunications, energy, and utility industries.
Why Should MTZ Be on Your Watchlist?
- Sales pipeline is in good shape as its backlog averaged 24.1% growth over the past two years
- Exciting sales outlook for the upcoming 12 months calls for 18.2% growth, an acceleration from its two-year trend
- Earnings per share grew by 77.1% annually over the last two years and trumped its peers
At $389.56 per share, MasTec trades at 42.6x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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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.
