Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here is one profitable company that generates reliable profits without sacrificing growth and two that may struggle to keep up.

Two Stocks to Sell:

A. O. Smith (AOS)

Trailing 12-Month GAAP Operating Margin: 18.1%

Credited with the invention of the glass-lined water heater, A.O. Smith (NYSE: AOS) manufactures water heating and treatment products for various industries.

Why Are We Hesitant About AOS?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 2.7% annually
3. Diminishing returns on capital suggest its earlier profit pools are drying up

A. O. Smith’s stock price of $70.64 implies a valuation ratio of 17.8x forward P/E. Read our free research report to see why you should think twice about including AOS in your portfolio.

Pediatrix Medical Group (MD)

Trailing 12-Month GAAP Operating Margin: 8.5%

With a network of approximately 2,620 affiliated physicians caring for some of the most vulnerable patients, Pediatrix Medical Group (NYSE: MD) provides specialized physician services focused on neonatal, maternal-fetal, pediatric cardiology and other pediatric subspecialty care across 37 states.

Why Is MD Risky?

1. Poor comparable store sales performance over the past two years indicates it’s having trouble bringing new patients into its facilities
2. Projected sales decline of 1.5% over the next 12 months indicates demand will continue deteriorating
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Pediatrix Medical Group is trading at $14.42 per share, or 8.5x forward P/E. To fully understand why you should be careful with MD, check out our full research report (it’s free).

One Stock to Watch:

Dutch Bros (BROS)

Trailing 12-Month GAAP Operating Margin: 9.2%

Started in 1992 by two brothers as a single pushcart, Dutch Bros (NYSE: BROS) is a dynamic coffee chain that’s captured the hearts of coffee enthusiasts across the United States.

Why Do We Watch BROS?

1. Rapid rollout of new restaurants to capitalize on market opportunities makes sense given its strong same-store sales performance
2. Average same-store sales growth of 5.4% over the past two years indicates its restaurants are resonating with diners
3. Free cash flow margin grew by 9.8 percentage points over the last year, giving the company more chips to play with

At $67.18 per share, Dutch Bros trades at 96.2x forward P/E. Is now the right time to buy? See for yourself in our full 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 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

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