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 are three profitable companies that don’t make the cut and some better opportunities instead.
Power Integrations (POWI)
Trailing 12-Month GAAP Operating Margin: 5.6%
A leading supplier of parts for electronics such as home appliances, Power Integrations (NASDAQ: POWI) is a semiconductor designer and developer specializing in products used for high-voltage power conversion.
Why Should You Sell POWI?
- Sales were flat over the last five years, indicating it’s failed to expand this cycle
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 11.7 percentage points
- Earnings per share have dipped by 3.1% annually over the past five years, which is concerning because stock prices follow EPS over the long term
At $58.08 per share, Power Integrations trades at 33.8x forward P/E. Read our free research report to see why you should think twice about including POWI in your portfolio.
Align Technology (ALGN)
Trailing 12-Month GAAP Operating Margin: 14.7%
Pioneering an alternative to traditional metal braces with nearly invisible plastic aligners, Align Technology (NASDAQ: ALGN) designs and manufactures Invisalign clear aligners, iTero intraoral scanners, and dental CAD/CAM software for orthodontic and restorative treatments.
Why Do We Think Twice About ALGN?
- Weak clear aligner shipments over the past two years indicate demand is soft and that the company may need to revise its strategy
- Free cash flow margin dropped by 7.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Eroding returns on capital suggest its historical profit centers are aging
Align Technology’s stock price of $200.10 implies a valuation ratio of 19.6x forward P/E. If you’re considering ALGN for your portfolio, see our FREE research report to learn more.
Waters Corporation (WAT)
Trailing 12-Month GAAP Operating Margin: 28.3%
Founded in 1958 and pioneering innovations in laboratory analysis for over six decades, Waters (NYSE: WAT) develops and manufactures analytical instruments, software, and consumables for liquid chromatography, mass spectrometry, and thermal analysis used in scientific research and quality testing.
Why Is WAT Not Exciting?
- Sales stagnated over the last two years and signal the need for new growth strategies
- 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
- Waning returns on capital imply its previous profit engines are losing steam
Waters Corporation is trading at $349.21 per share, or 26.4x forward P/E. Dive into our free research report to see why there are better opportunities than WAT.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% 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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