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".
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here is one profitable company that balances growth and profitability and two that may struggle to keep up.
Two Stocks to Sell:
Chewy (CHWY)
Trailing 12-Month GAAP Operating Margin: 1%
Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE:CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.
Why Does CHWY Give Us Pause?
- Annual sales growth of 9.3% over the last three years lagged behind its consumer internet peers as its large revenue base made it difficult to generate incremental demand
- Estimated sales growth of 5.1% for the next 12 months implies demand will slow from its three-year trend
- Bad unit economics and steep infrastructure costs are reflected in its low gross margin of 29%
Chewy’s stock price of $42.66 implies a valuation ratio of 24.2x forward EV/EBITDA. Read our free research report to see why you should think twice about including CHWY in your portfolio.
Steelcase (SCS)
Trailing 12-Month GAAP Operating Margin: 3.5%
Founded in 1912 when metal office furniture was replacing wooden alternatives, Steelcase (NYSE:SCS) is a global office furniture manufacturer that designs and produces workplace solutions including desks, chairs, architectural products, and services.
Why Is SCS Risky?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Flat earnings per share over the last five years lagged its peers
- Low returns on capital reflect management’s struggle to allocate funds effectively
Steelcase is trading at $10.62 per share, or 9.7x forward P/E. Check out our free in-depth research report to learn more about why SCS doesn’t pass our bar.
One Stock to Watch:
W.W. Grainger (GWW)
Trailing 12-Month GAAP Operating Margin: 15.3%
Founded as a supplier of motors, W.W. Grainger (NYSE:GWW) provides maintenance, repair, and operating (MRO) supplies and services to businesses and institutions.
Why Do We Like GWW?
- Operating margin improvement of 5.1 percentage points over the last five years demonstrates its ability to scale efficiently
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are growing as it capitalizes on even better market opportunities
At $1,024 per share, W.W. Grainger trades at 24.6x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. 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