A company with profits isn’t always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
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 balances growth and profitability and two that may struggle to keep up.
Two Stocks to Sell:
UFP Industries (UFPI)
Trailing 12-Month GAAP Operating Margin: 6.8%
Beginning as a lumber supplier in the 1950s, UFP Industries (NASDAQ: UFPI) is a holding company making building materials for the construction, retail, and industrial sectors.
Why Are We Cautious About UFPI?
- Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
UFP Industries’s stock price of $99.24 implies a valuation ratio of 13.8x forward P/E. Read our free research report to see why you should think twice about including UFPI in your portfolio.
Connection (CNXN)
Trailing 12-Month GAAP Operating Margin: 3.5%
Starting as a small computer products seller in 1982 and evolving into a Fortune 1000 company, Connection (NASDAQ: CNXN) is a technology solutions provider that helps businesses and government agencies design, purchase, implement, and manage their IT infrastructure and systems.
Why Should You Dump CNXN?
- Sales stagnated over the last five years and signal the need for new growth strategies
- Earnings per share lagged its peers over the last five years as they only grew by 1% annually
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2.5% for the last five years
At $65.81 per share, Connection trades at 18.9x forward P/E. Dive into our free research report to see why there are better opportunities than CNXN.
One Stock to Buy:
Palantir (PLTR)
Trailing 12-Month GAAP Operating Margin: 13%
Started by Peter Thiel after seeing US defence agencies struggle in the aftermath of the 2001 terrorist attacks, Palantir (NYSE: PLTR) offers software as a service platform that helps government agencies and large enterprises use data to make better decisions.
Why Will PLTR Outperform?
- Average billings growth of 38.6% over the last year enhances its liquidity and shows there is steady demand for its products
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Palantir is trading at $142.96 per share, or 87.8x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even 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 Growth Stocks for this month. 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 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
