Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. 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:
Petco (WOOF)
Trailing 12-Month GAAP Operating Margin: 1.8%
Historically known for its window displays of pets for sale or adoption, Petco (NASDAQ: WOOF) is a specialty retailer of pet food and supplies as well as a provider of services such as wellness checks and grooming.
Why Do We Steer Clear of WOOF?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Issuance of new shares over the last three years caused its earnings per share to fall by 42% annually
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Petco’s stock price of $2.86 implies a valuation ratio of 13.4x forward P/E. To fully understand why you should be careful with WOOF, check out our full research report (it’s free for active Edge members).
Norfolk Southern (NSC)
Trailing 12-Month GAAP Operating Margin: 37.2%
Starting with a single route from Virginia to North Carolina, Norfolk Southern (NYSE: NSC) is a freight transportation company operating a major railroad network across the eastern United States.
Why Should You Sell NSC?
- Underwhelming unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Flat earnings per share over the last two years underperformed the sector average
- Free cash flow margin dropped by 9.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Norfolk Southern is trading at $288 per share, or 22.9x forward P/E. Check out our free in-depth research report to learn more about why NSC doesn’t pass our bar.
One Stock to Buy:
AMD (AMD)
Trailing 12-Month GAAP Operating Margin: 8.8%
Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices (NASDAQ: AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.
Why Are We Backing AMD?
- Annual revenue growth of 29.9% over the past five years was outstanding, reflecting market share gains this cycle
- Projected revenue growth of 27.1% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings per share grew by 27.9% annually over the last five years, massively outpacing its peers
At $224.23 per share, AMD trades at 38.6x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
Check out the high-quality names we’ve flagged 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.
