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 that may struggle to keep up.
Two Stocks to Sell:
Mondelez (MDLZ)
Trailing 12-Month GAAP Operating Margin: 11.2%
Founded as Nabisco in 1903, Mondelez (NASDAQ:MDLZ) is a packaged snacks powerhouse best known for its Oreo, Cadbury, Toblerone, Ritz, and Trident brands.
Why Does MDLZ Give Us Pause?
- Falling unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Estimated sales growth of 2.6% for the next 12 months implies demand will slow from its three-year trend
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 3% annually
Mondelez’s stock price of $61.41 implies a valuation ratio of 18.9x forward P/E. To fully understand why you should be careful with MDLZ, check out our full research report (it’s free).
Watsco (WSO)
Trailing 12-Month GAAP Operating Margin: 9.4%
Originally a manufacturing company, Watsco (NYSE:WSO) today only distributes air conditioning, heating, and refrigeration equipment, as well as related parts and supplies.
Why Do We Avoid WSO?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1% annually over the last two years
- Issuance of new shares over the last two years caused its earnings per share to fall by 6.1% annually, even worse than its revenue declines
- Eroding returns on capital suggest its historical profit centers are aging
Watsco is trading at $325.47 per share, or 26.3x forward P/E. Read our free research report to see why you should think twice about including WSO in your portfolio.
One Stock to Buy:
O'Reilly (ORLY)
Trailing 12-Month GAAP Operating Margin: 19.6%
Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ:ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.
Why Do We Love ORLY?
- Locations open for at least a year are seeing increased demand as same-store sales have averaged 4.9% growth over the past two years
- Highly efficient business model is illustrated by its impressive 19.4% operating margin
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
At $86.84 per share, O'Reilly trades at 24.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.