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.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, 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:
Bristol-Myers Squibb (BMY)
Trailing 12-Month GAAP Operating Margin: 16.7%
With roots dating back to 1887 and a transformative merger in 1989 that gave the company its current name, Bristol-Myers Squibb (NYSE: BMY) discovers, develops, and markets prescription medications for serious diseases including cancer, blood disorders, immunological conditions, and cardiovascular diseases.
Why Are We Hesitant About BMY?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.7% for the last two years
- Estimated sales decline of 4.6% for the next 12 months implies a challenging demand environment
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $47.23 per share, Bristol-Myers Squibb trades at 7.4x forward P/E. To fully understand why you should be careful with BMY, check out our full research report (it’s free).
Ally Financial (ALLY)
Trailing 12-Month GAAP Operating Margin: 11.8%
Born from the former GMAC (General Motors Acceptance Corporation) and rebranded in 2010, Ally Financial (NYSE: ALLY) operates a digital-first bank offering auto financing, insurance, mortgage lending, and investment services to consumers and commercial clients.
Why Do We Steer Clear of ALLY?
- Annual sales declines of 3.8% for the past two years show its products and services struggled to connect with the market during this cycle
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 8.9% annually, worse than its revenue
- 1.7% annual tangible book value per share growth over the last five years was slower than its financials peers
Ally Financial’s stock price of $40.46 implies a valuation ratio of 8.9x forward P/E. Dive into our free research report to see why there are better opportunities than ALLY.
One Stock to Watch:
Lennox (LII)
Trailing 12-Month GAAP Operating Margin: 19.5%
Based in Texas and founded over a century ago, Lennox (NYSE: LII) is a climate control solutions company offering heating, ventilation, air conditioning, and refrigeration (HVACR) goods.
Why Does LII Stand Out?
- Healthy operating margin of 16.3% shows it’s a well-run company with efficient processes, and its rise over the last five years was fueled by some leverage on its fixed costs
- Earnings per share grew by 22.2% annually over the last two years, massively outpacing its peers
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Lennox is trading at $596.84 per share, or 23.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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-small-cap company Exlservice (+354% 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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