1 Profitable Stock to Own for Decades and 2 to Ignore

May 19, 2025 at 00:40 AM EDT

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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 generates reliable profits without sacrificing growth and two that may face some trouble.

Two Stocks to Sell:

Kellanova (K)

Trailing 12-Month GAAP Operating Margin: 15.1%

With Corn Flakes as its first and most iconic product, Kellanova (NYSE: K) is a packaged foods company that is dominant in the cereal and snack categories.

Why Is K Not Exciting?

Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
Estimated sales growth of 1.9% for the next 12 months is soft and implies weaker demand
Earnings per share have contracted by 1.2% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance

At $82.30 per share, Kellanova trades at 21x forward P/E. To fully understand why you should be careful with K, check out our full research report (it’s free).

Playa Hotels & Resorts (PLYA)

Trailing 12-Month GAAP Operating Margin: 16.5%

Sporting a roster of beachfront properties, Playa Hotels & Resorts (NASDAQ: PLYA) is an owner, operator, and developer of all-inclusive resorts in prime vacation destinations.

Why Does PLYA Give Us Pause?

Weak revenue per room over the past two years indicates challenges in maintaining pricing power and occupancy rates
Estimated sales decline of 2.6% for the next 12 months implies an even more challenging demand environment
Low returns on capital reflect management’s struggle to allocate funds effectively

Playa Hotels & Resorts’s stock price of $13.44 implies a valuation ratio of 21.6x forward P/E. If you’re considering PLYA for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

Aris Water (ARIS)

Trailing 12-Month GAAP Operating Margin: 23.6%

Primarily serving the oil and gas industry, Aris Water (NYSE: ARIS) is a provider of water handling and recycling solutions.

Why Are We Backing ARIS?

Impressive 15.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
Earnings growth has trumped its peers over the last three years as its EPS has compounded at 27.4% annually
Free cash flow turned positive over the last five years, showing the company is at an important crossroads

Aris Water is trading at $23.90 per share, or 15.6x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

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.

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