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.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here is one profitable company that generates reliable profits without sacrificing growth and two that may struggle to keep up.
Two Stocks to Sell:
Yum China (YUMC)
Trailing 12-Month GAAP Operating Margin: 10.8%
One of China’s largest restaurant companies, Yum China (NYSE: YUMC) is an independent entity spun off from Yum! Brands in 2016.
Why Does YUMC Worry Us?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
- Projected sales growth of 5% for the next 12 months suggests sluggish demand
- Gross margin of 20.1% is below its competitors, leaving less money for marketing and promotions
Yum China is trading at $47.68 per share, or 16.6x forward P/E. Read our free research report to see why you should think twice about including YUMC in your portfolio.
Crocs (CROX)
Trailing 12-Month GAAP Operating Margin: 5%
Founded in 2002, Crocs (NASDAQ: CROX) sells casual footwear and is known for its iconic clog shoe.
Why Are We Out on CROX?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Free cash flow margin is on track to jump by 1.9 percentage points next year, meaning the company will have more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Crocs’s stock price of $89 implies a valuation ratio of 7.3x forward P/E. Check out our free in-depth research report to learn more about why CROX doesn’t pass our bar.
One Stock to Watch:
Seagate Technology (STX)
Trailing 12-Month GAAP Operating Margin: 22.8%
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 Do We Like STX?
- Annual revenue growth of 18.5% over the last two years was superb and indicates its market share increased during this cycle
- Projected revenue growth of 19.7% for the next 12 months suggests its momentum from the last two years will persist
- Operating margin increased by 6.9 percentage points over the last five years as it refined its cost structure
At $332.75 per share, Seagate Technology trades at 23.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
