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.
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 best left off your watchlist.
Two Stocks to Sell:
General Dynamics (GD)
Trailing 12-Month GAAP Operating Margin: 10.3%
Creator of the famous M1 Abrahms tank, General Dynamics (NYSE:GD) develops aerospace, marine systems, combat systems, and information technology products.
Why Does GD Worry Us?
- Average backlog growth of 2.1% over the past two years was mediocre and suggests fewer customers signed long-term contracts
- Estimated sales growth of 3.3% for the next 12 months implies demand will slow from its two-year trend
- Earnings per share lagged its peers over the last five years as they only grew by 5.8% annually
General Dynamics is trading at $333.50 per share, or 21.2x forward P/E. Read our free research report to see why you should think twice about including GD in your portfolio.
Arrow Electronics (ARW)
Trailing 12-Month GAAP Operating Margin: 2.5%
Founded as a single retail store, Arrow Electronics (NYSE:ARW) provides electronic components and enterprise computing solutions to businesses globally.
Why Do We Avoid ARW?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 10.8% annually over the last two years
- Sales were less profitable over the last two years as its earnings per share fell by 31% annually, worse than its revenue declines
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $113.65 per share, Arrow Electronics trades at 9.3x forward P/E. Dive into our free research report to see why there are better opportunities than ARW.
One Stock to Watch:
Zoetis (ZTS)
Trailing 12-Month GAAP Operating Margin: 37.1%
Originally spun off from Pfizer in 2013 as the world's largest pure-play animal health company, Zoetis (NYSE:ZTS) discovers, develops, and sells medicines, vaccines, diagnostic products, and services for pets and livestock animals worldwide.
Why Are We Fans of ZTS?
- Average constant currency growth of 8.6% over the past two years demonstrates its ability to grow internationally despite currency fluctuations
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
- Industry-leading 29.4% return on capital demonstrates management’s skill in finding high-return investments
Zoetis’s stock price of $142.10 implies a valuation ratio of 21.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
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 Strong Momentum Stocks for this week. 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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