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".
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are three profitable companies that don’t make the cut and some better opportunities instead.
BlackLine (BL)
Trailing 12-Month GAAP Operating Margin: 3.1%
Started in 2001 by software engineer Therese Tucker, one of the very few women founders who took their companies public, BlackLine (NASDAQ: BL) provides software for organizations to automate accounting and finance tasks.
Why Are We Cautious About BL?
- Products, pricing, or go-to-market strategy may need some adjustments as its 7.4% average billings growth over the last year was weak
- Estimated sales growth of 7.5% for the next 12 months implies demand will slow from its three-year trend
- Efficiency has decreased over the last year as its operating margin fell by 2.1 percentage points
BlackLine’s stock price of $58.10 implies a valuation ratio of 5.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BL.
DigitalOcean (DOCN)
Trailing 12-Month GAAP Operating Margin: 14.5%
Started by brothers Ben and Moisey Uretsky, DigitalOcean (NYSE: DOCN) provides a simple, low-cost platform that allows developers and small and medium-sized businesses to host applications and data in the cloud.
Why Does DOCN Fall Short?
- Competitive market dynamics make it difficult to retain customers, leading to a weak 98.2% net revenue retention rate
- Gross margin of 59.9% reflects its high servicing costs
DigitalOcean is trading at $29.38 per share, or 3.4x forward price-to-sales. To fully understand why you should be careful with DOCN, check out our full research report (it’s free).
Latham (SWIM)
Trailing 12-Month GAAP Operating Margin: 3%
Started as a family business, Latham (NASDAQ: SWIM) is a global designer and manufacturer of in-ground residential swimming pools and related products.
Why Does SWIM Give Us Pause?
- Annual revenue declines of 10.9% over the last two years indicate problems with its market positioning
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Negative returns on capital show management lost money while trying to expand the business
At $5.93 per share, Latham trades at 43.6x forward P/E. Check out our free in-depth research report to learn more about why SWIM doesn’t pass our bar.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 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.
