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. That said, here is one profitable company that balances growth and profitability and two that may struggle to keep up.
Two Stocks to Sell:
Williams-Sonoma (WSM)
Trailing 12-Month GAAP Operating Margin: 18.6%
Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE: WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.
Why Is WSM Not Exciting?
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- 3.7 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
At $202.40 per share, Williams-Sonoma trades at 22.9x forward P/E. To fully understand why you should be careful with WSM, check out our full research report (it’s free).
Dave & Buster's (PLAY)
Trailing 12-Month GAAP Operating Margin: 9.4%
Founded by a former game parlor and bar operator, Dave & Buster’s (NASDAQ: PLAY) operates a chain of arcades providing immersive entertainment experiences.
Why Does PLAY Fall Short?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Dave & Buster's is trading at $23.98 per share, or 11.1x forward P/E. Dive into our free research report to see why there are better opportunities than PLAY.
One Stock to Buy:
Berkshire Hathaway (BRK.A)
Trailing 12-Month GAAP Operating Margin: 23.6%
Led by legendary investor Warren Buffett since 1965, transforming it from a struggling textile manufacturer into a corporate giant, Berkshire Hathaway (NYSE: BRK.A) is a diversified holding company that owns businesses across insurance, railroads, utilities, manufacturing, retail, and services sectors.
Why Is BRK.A a Good Business?
- Share repurchases over the last two years enabled its annual earnings per share growth of 21.2% to outpace its revenue gains
- Annual tangible book value per share growth of 18.8% over the last two years was superb and indicates its capital strength increased during this cycle
- Industry-leading 14.2% return on equity demonstrates management’s skill in finding high-return investments
Berkshire Hathaway’s stock price of $750,103 implies a valuation ratio of 22.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 Exlservice (+354% 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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