Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
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 balances growth and profitability and two that may struggle to keep up.
Two Stocks to Sell:
Thermo Fisher (TMO)
Trailing 12-Month GAAP Operating Margin: 17.5%
With over 14,000 sales personnel and a portfolio spanning more than 2,500 technology manufacturers, Thermo Fisher Scientific (NYSE: TMO) provides scientific equipment, reagents, consumables, software, and laboratory services to pharmaceutical, biotech, academic, and healthcare customers worldwide.
Why Is TMO Not Exciting?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 6.7 percentage points
- Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
At $466.53 per share, Thermo Fisher trades at 18.5x forward P/E. Check out our free in-depth research report to learn more about why TMO doesn’t pass our bar.
Jefferies (JEF)
Trailing 12-Month GAAP Operating Margin: 12%
Tracing its roots back to 1962 and rebranded from Leucadia National Corporation in 2018, Jefferies Financial Group (NYSE: JEF) is a global investment banking and capital markets firm that provides advisory services, securities trading, and asset management to corporations, institutions, and wealthy individuals.
Why Are We Cautious About JEF?
- 1.8% annual revenue growth over the last five years was slower than its financials peers
- Earnings per share fell by 7.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
Jefferies’s stock price of $48.07 implies a valuation ratio of 12.6x forward P/E. To fully understand why you should be careful with JEF, check out our full research report (it’s free).
One Stock to Buy:
Watts Water Technologies (WTS)
Trailing 12-Month GAAP Operating Margin: 18.4%
Founded in 1874, Watts Water (NYSE: WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Is WTS a Top Pick?
- Annual revenue growth of 10.1% over the last five years beat the sector average and underscores the unique value of its offerings
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin increased by 6.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Watts Water Technologies is trading at $303.94 per share, or 25.8x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
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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.
