A company with profits isn’t always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here is one profitable company that generates reliable profits without sacrificing growth and two that may face some trouble.
Two Stocks to Sell:
Dollar Tree (DLTR)
Trailing 12-Month GAAP Operating Margin: 6.2%
A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ:DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.
Why Are We Cautious About DLTR?
- Annual sales growth of 1.1% over the last six years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
- Estimated sales decline of 21.7% for the next 12 months implies a challenging demand environment
- Underwhelming 9.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $96 per share, Dollar Tree trades at 17.8x forward P/E. To fully understand why you should be careful with DLTR, check out our full research report (it’s free).
Biogen (BIIB)
Trailing 12-Month GAAP Operating Margin: 21.1%
Founded in 1978 and pioneering treatments for some of medicine's most complex challenges, Biogen (NASDAQ:BIIB) develops and markets therapies for neurological conditions, including multiple sclerosis, Alzheimer's disease, spinal muscular atrophy, and rare diseases.
Why Does BIIB Worry Us?
- Sales tumbled by 7.4% annually over the last five years, showing market trends are working against its favor during this cycle
- Forecasted revenue decline of 6.9% for the upcoming 12 months implies demand will fall even further
- Sales were less profitable over the last five years as its earnings per share fell by 15.1% annually, worse than its revenue declines
Biogen’s stock price of $131.01 implies a valuation ratio of 8.2x forward P/E. Read our free research report to see why you should think twice about including BIIB in your portfolio.
One Stock to Watch:
Yelp (YELP)
Trailing 12-Month GAAP Operating Margin: 11.8%
Founded by PayPal alumni Jeremy Stoppelman and Russel Simmons, Yelp (NYSE:YELP) is an online platform that helps people discover local businesses through crowd-sourced reviews.
Why Are We Fans of YELP?
- Prominent and differentiated platform culminates in a best-in-class gross margin of 91.2%
- Healthy EBITDA margin of 25.7% shows it’s a well-run company with efficient processes, and its rise over the last few years was fueled by some leverage on its fixed costs
- YELP is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
Yelp is trading at $35.82 per share, or 6.7x forward EV/EBITDA. 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
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 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-micro-cap company Tecnoglass (+1,754% 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.