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. That said, 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:
Chewy (CHWY)
Trailing 12-Month GAAP Operating Margin: 1.3%
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 Worry Us?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 9% for the last three years
- Estimated sales growth of 5.9% for the next 12 months implies demand will slow from its three-year trend
- High servicing costs result in an inferior gross margin of 29.2% that must be offset through higher volumes
Chewy is trading at $33.65 per share, or 18.5x forward EV/EBITDA. If you’re considering CHWY for your portfolio, see our FREE research report to learn more.
BrightView (BV)
Trailing 12-Month GAAP Operating Margin: 4.9%
An official field consultant for Major League Baseball, BrightView (NYSE: BV) offers landscaping design, development, and maintenance.
Why Do We Think BV Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.7% annually over the last two years
- Earnings per share have dipped by 2.5% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Free cash flow margin dropped by 5.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $12.32 per share, BrightView trades at 15x forward P/E. Dive into our free research report to see why there are better opportunities than BV.
One Stock to Watch:
Universal Display (OLED)
Trailing 12-Month GAAP Operating Margin: 38.9%
Serving major consumer electronics manufacturers, Universal Display (NASDAQ: OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications.
Why Does OLED Stand Out?
- Annual revenue growth of 12.4% over the past five years was outstanding, reflecting market share gains this cycle
- Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 75.4%
- Highly efficient business model is illustrated by its impressive 38.1% operating margin
Universal Display’s stock price of $145.32 implies a valuation ratio of 28.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.
Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. 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 Comfort Systems (+782% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
