Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. 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:

Arrow Electronics (ARW)

Trailing 12-Month GAAP Operating Margin: 3.1%

Founded as a single retail store, Arrow Electronics (NYSE: ARW) provides electronic components and enterprise computing solutions to businesses globally.

Why Are We Out on ARW?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 1.8% for the last five years
2. Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 1.5% annually
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Arrow Electronics is trading at $191.76 per share, or 10.3x forward P/E. Check out our free in-depth research report to learn more about why ARW doesn’t pass our bar.

Affirm (AFRM)

Trailing 12-Month GAAP Operating Margin: 6.2%

Founded by PayPal co-founder Max Levchin with a mission to create honest financial products, Affirm (NASDAQ: AFRM) provides a payment network that allows consumers to make purchases and pay for them over time with transparent, flexible installment loans.

Why Are We Hesitant About AFRM?

1. Negative return on equity shows that some of its growth strategies have backfired
2. High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $64.23 per share, Affirm trades at 18.3x forward P/E. Dive into our free research report to see why there are better opportunities than AFRM.

One Stock to Watch:

Astec (ASTE)

Trailing 12-Month GAAP Operating Margin: 5.7%

Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ: ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.

Why Are We Fans of ASTE?

1. Estimated revenue growth of 12.1% for the next 12 months implies demand will accelerate from its two-year trend
2. Operating margin improvement of 4.6 percentage points over the last five years demonstrates its ability to scale efficiently
3. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 18.5% outpaced its revenue gains

Astec’s stock price of $54.83 implies a valuation ratio of 13.7x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.