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".
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here is one profitable company that balances growth and profitability and two that may face some trouble.
Two Stocks to Sell:
Polaris (PII)
Trailing 12-Month GAAP Operating Margin: 1.9%
Founded in 1954, Polaris (NYSE: PII) designs and manufactures high-performance off-road vehicles, snowmobiles, and motorcycles.
Why Is PII Risky?
- Sales trends were unexciting over the last five years as its 1.1% annual growth was below the typical consumer discretionary company
- Free cash flow margin is forecasted to shrink by 5.3 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $66.28 per share, Polaris trades at 61.5x forward P/E. To fully understand why you should be careful with PII, check out our full research report (it’s free for active Edge members).
Warner Music Group (WMG)
Trailing 12-Month GAAP Operating Margin: 10.3%
Launching the careers of legendary artists like Frank Sinatra, Warner Music Group (NASDAQ: WMG) is a music company managing a diverse portfolio of artists, recordings, and music publishing services worldwide.
Why Do We Steer Clear of WMG?
- Muted 8.5% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Low free cash flow margin of 9% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Warner Music Group is trading at $29.95 per share, or 19.5x forward P/E. Dive into our free research report to see why there are better opportunities than WMG.
One Stock to Buy:
Doximity (DOCS)
Trailing 12-Month GAAP Operating Margin: 39.7%
With over 80% of U.S. physicians as members of its digital community, Doximity (NYSE: DOCS) operates a digital platform that enables physicians and other healthcare professionals to collaborate, stay current with medical news, manage their careers, and conduct virtual patient visits.
Why Do We Love DOCS?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 20.1% over the last year
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Strong free cash flow margin of 50.2% enables it to reinvest or return capital consistently
Doximity’s stock price of $43.86 implies a valuation ratio of 13x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-micro-cap company Kadant (+351% 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.
