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 that may face some trouble.
Two Stocks to Sell:
Gap (GAP)
Trailing 12-Month GAAP Operating Margin: 7.5%
Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE: GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.
Why Are We Hesitant About GAP?
- Products aren't resonating with the market as its revenue declined by 1.3% annually over the last three years
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 2.2 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $26.53 per share, Gap trades at 12.1x forward P/E. Check out our free in-depth research report to learn more about why GAP doesn’t pass our bar.
PepsiCo (PEP)
Trailing 12-Month GAAP Operating Margin: 11%
With a history that goes back more than a century, PepsiCo (NASDAQ: PEP) is a household name in food and beverages today and best known for its flagship soda.
Why Is PEP Not Exciting?
- Falling unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Anticipated sales growth of 4% for the next year implies demand will be shaky
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.4 percentage points
PepsiCo is trading at $149.50 per share, or 17.6x forward P/E. To fully understand why you should be careful with PEP, check out our full research report (it’s free for active Edge members).
One Stock to Watch:
FTAI Infrastructure (FIP)
Trailing 12-Month GAAP Operating Margin: 10.6%
Spun off from FTAI Aviation in 2021, FTAI Infrastructure (NASDAQ: FIP) invests in and operates infrastructure and related assets across the transportation and energy sectors.
Why Are We Fans of FIP?
- Market share has increased this cycle as its 19% annual revenue growth over the last two years was exceptional
- Market share is on track to rise over the next 12 months as its 73.5% projected revenue growth implies demand will accelerate from its two-year trend
FTAI Infrastructure’s stock price of $5.14 implies a valuation ratio of 1.9x forward EV-to-EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 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-micro-cap company Kadant (+351% 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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