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 leverages its financial strength to beat the competition and two that may struggle to keep up.
Two Stocks to Sell:
Lovesac (LOVE)
Trailing 12-Month GAAP Operating Margin: 1.2%
Known for its oversized, premium beanbags, Lovesac (NASDAQ: LOVE) is a specialty furniture brand selling modular furniture.
Why Should You Dump LOVE?
- Annual revenue growth of 19.5% over the last five years was below our standards for the consumer discretionary sector
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Lovesac’s stock price of $13.02 implies a valuation ratio of 10.2x forward EV-to-EBITDA. If you’re considering LOVE for your portfolio, see our FREE research report to learn more.
MSC Industrial (MSM)
Trailing 12-Month GAAP Operating Margin: 8%
Founded in NYC’s Little Italy, MSC Industrial Direct (NYSE: MSM) provides industrial supplies and equipment, offering vast and reliable selection for customers such as contractors
Why Do We Think MSM Will Underperform?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 3.3% annually while its revenue grew
- Eroding returns on capital suggest its historical profit centers are aging
MSC Industrial is trading at $92.07 per share, or 21.6x forward P/E. Dive into our free research report to see why there are better opportunities than MSM.
One Stock to Watch:
PTC (PTC)
Trailing 12-Month GAAP Operating Margin: 38%
Originally known as Parametric Technology Corporation until its 2013 rebranding, PTC (NASDAQ: PTC) provides software that helps manufacturers design, develop, and service physical products through digital solutions for CAD, PLM, ALM, and SLM.
Why Could PTC Be a Winner?
- Prominent and differentiated software results in a premier gross margin of 84.2%
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Healthy operating margin of 38% shows it’s a well-run company with efficient processes, and its profits increased over the last year as it scaled
At $150.76 per share, PTC trades at 6.6x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
