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 best left off your watchlist.
Two Stocks to Sell:
Movado (MOV)
Trailing 12-Month GAAP Operating Margin: 3.4%
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 Do We Avoid MOV?
- Annual revenue growth of 4.7% 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
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Movado is trading at $21.48 per share, or 0.7x forward price-to-sales. To fully understand why you should be careful with MOV, check out our full research report (it’s free for active Edge members).
Applied Industrial (AIT)
Trailing 12-Month GAAP Operating Margin: 11%
Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE:AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.
Why Does AIT Give Us Pause?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5.1%
- Earnings per share lagged its peers over the last two years as they only grew by 6% annually
Applied Industrial’s stock price of $261.75 implies a valuation ratio of 24.3x forward P/E. Dive into our free research report to see why there are better opportunities than AIT.
One Stock to Buy:
Microsoft (MSFT)
Trailing 12-Month GAAP Operating Margin: 46.3%
Originally named "Micro-soft" for microcomputer software when founded in 1975, Microsoft (NASDAQ:MSFT) is a global technology company that develops software, cloud services, devices, and AI solutions for consumers, businesses, and organizations worldwide.
Why Will MSFT Outperform?
- Microsoft is one of the great brands not just in tech but all of business. It produces mission-critical software and bundles it together, resulting in cream-of-the-crop gross margins.
- The company's elite unit economics lead to robust profit margins that improve over time. This speaks to the scale advantages and operating efficiency across its diverse portfolio, which spans everything from Office and Azure to Minecraft.
- Microsoft has a virtuous cycle of returns. Its dominant market position enables it to generate strong free cash flow, and it reinvests these funds into promising ventures that further strengthen its competitive moat.
At $477.14 per share, Microsoft trades at 29.1x forward price-to-earnings. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
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 Comfort Systems (+782% 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
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