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.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here is one profitable company that leverages its financial strength to beat the competition and two that may face some trouble.
Two Stocks to Sell:
Frontdoor (FTDR)
Trailing 12-Month GAAP Operating Margin: 19.3%
Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor (NASDAQ:FTDR) is a provider of home warranty and service plans.
Why Do We Steer Clear of FTDR?
- 7.1% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Poor expense management has led to an operating margin of 18.9% that is below the industry average
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
At $56.27 per share, Frontdoor trades at 13.1x forward P/E. Check out our free in-depth research report to learn more about why FTDR doesn’t pass our bar.
Simpson (SSD)
Trailing 12-Month GAAP Operating Margin: 19%
Aiming to build safer and stronger buildings, Simpson (NYSE:SSD) designs and manufactures structural connectors, anchors, and other construction products.
Why Are We Hesitant About SSD?
- Annual revenue growth of 2.7% over the last two years was below our standards for the industrials sector
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
Simpson is trading at $205.80 per share, or 23.1x forward P/E. Read our free research report to see why you should think twice about including SSD in your portfolio.
One Stock to Watch:
HNI (HNI)
Trailing 12-Month GAAP Operating Margin: 9.2%
With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE:HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.
Why Are We Fans of HNI?
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 25.4% exceeded its revenue gains over the last two years
- Improving returns on capital reflect management’s ability to monetize investments
HNI’s stock price of $51.72 implies a valuation ratio of 13.4x forward P/E. Is now the time to initiate a position? Find out in our full 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 Strong Momentum Stocks for this week. 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.