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 are three profitable companies that don’t make the cut and some better opportunities instead.
Sensata Technologies (ST)
Trailing 12-Month GAAP Operating Margin: 3.3%
Originally a temperature sensor control maker and a subsidiary of Texas Instruments for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.
Why Do We Pass on ST?
- Sales trends were unexciting over the last five years as its 2.7% annual growth was below the typical semiconductor company
- Forecasted revenue decline of 3.4% for the upcoming 12 months implies demand will fall even further
- Efficiency has decreased over the last five years as its operating margin fell by 10.3 percentage points
Sensata Technologies’s stock price of $32.20 implies a valuation ratio of 10.1x forward P/E. Read our free research report to see why you should think twice about including ST in your portfolio.
Western Digital (WDC)
Trailing 12-Month GAAP Operating Margin: 17.5%
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Why Should You Sell WDC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 11.1% annually over the last five years
- Negative 21.4% gross margin means it loses money on every sale and must pivot or scale quickly to survive
- Poor expense management has led to an operating margin of 3.8% that is below the industry average
At $64.02 per share, Western Digital trades at 13.3x forward P/E. Check out our free in-depth research report to learn more about why WDC doesn’t pass our bar.
Movado (MOV)
Trailing 12-Month GAAP Operating Margin: 2.8%
With its watches displayed in 20 museums around the world, Movado (NYSE: MOV) is a watchmaking company with a portfolio of watch brands and accessories.
Why Is MOV Risky?
- Annual revenue declines of 6% over the last two years indicate problems with its market positioning
- Operating margin of 4.4% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Waning returns on capital imply its previous profit engines are losing steam
Movado is trading at $16.62 per share, or 0.6x trailing 12-month price-to-sales. If you’re considering MOV for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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).
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