Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.

Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here is one profitable company that generates reliable profits without sacrificing growth and two best left off your watchlist.

Two Stocks to Sell:

Getty Images (GETY)

Trailing 12-Month GAAP Operating Margin: 15.2%

With a vast library of over 562 million visual assets documenting everything from breaking news to iconic historical moments, Getty Images (NYSE: GETY) is a global visual content marketplace that licenses photos, videos, illustrations, and music to businesses, media outlets, and creative professionals.

Why Does GETY Fall Short?

1. Sales trends were unexciting over the last two years as its 1.3% annual growth was below the typical business services company
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.2 percentage points
3. Eroding returns on capital suggest its historical profit centers are aging

At $1.57 per share, Getty Images trades at 25.7x forward P/E. Read our free research report to see why you should think twice about including GETY in your portfolio.

American Eagle (AEO)

Trailing 12-Month GAAP Operating Margin: 5.1%

With a heavy focus on denim, American Eagle Outfitters (NYSE: AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.

Why Is AEO Not Exciting?

1. Annual revenue growth of 3.9% over the last six years was below our standards for the consumer retail sector
2. Performance over the past six years shows its incremental sales were much less profitable, as its earnings per share fell by 5.3% annually
3. Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging

American Eagle’s stock price of $17.55 implies a valuation ratio of 12.8x forward P/E. If you’re considering AEO for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

American Express (AXP)

Trailing 12-Month GAAP Operating Margin: 25.7%

Recognizable by its iconic green logo and the slogan "Don't leave home without it," American Express (NYSE: AXP) is a global payments company that issues credit and charge cards, processes merchant transactions, and offers travel and lifestyle benefits to consumers and businesses.

Why Is AXP a Top Pick?

1. Solid 12.1% annual revenue growth over the last five years indicates its offering’s solve complex business issues
2. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. ROE punches in at 32.9%, illustrating management’s expertise in identifying profitable investments

American Express is trading at $367.19 per share, or 22.4x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

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