Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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

Dole (DOLE)

Trailing 12-Month GAAP Operating Margin: 2.7%

Known for its delicious pineapples and Hawaiian roots, Dole (NYSE: DOLE) is a global agricultural company specializing in fresh fruits and vegetables.

Why Are We Hesitant About DOLE?

1. Sales were flat over the last three years, indicating it’s failed to expand its business
2. Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 8.4% that must be offset through higher volumes
3. Subpar operating margin of 2.8% constrains its ability to invest in process improvements or effectively respond to new competitive threats

Dole’s stock price of $14.10 implies a valuation ratio of 10.1x forward P/E. Dive into our free research report to see why there are better opportunities than DOLE.

Charles River Laboratories (CRL)

Trailing 12-Month GAAP Operating Margin: 3.1%

Named after the Massachusetts river where it was founded in 1947, Charles River Laboratories (NYSE: CRL) provides non-clinical drug development services, research models, and manufacturing support to pharmaceutical and biotechnology companies.

Why Do We Think Twice About CRL?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Projected sales for the next 12 months are flat and suggest demand will be subdued
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Charles River Laboratories is trading at $155.80 per share, or 15.5x forward P/E. Check out our free in-depth research report to learn more about why CRL doesn’t pass our bar.

One Stock to Watch:

LegalZoom (LZ)

Trailing 12-Month GAAP Operating Margin: 5%

Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.

Why Do We Like LZ?

1. Subscription Units are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
2. Share repurchases over the last three years enabled its annual earnings per share growth of 177% to outpace its revenue gains
3. Free cash flow margin jumped by 14.9 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

At $10.88 per share, LegalZoom trades at 10.8x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

High-Quality Stocks for All Market Conditions

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