Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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:
Paylocity (PCTY)
Trailing 12-Month GAAP Operating Margin: 21.8%
Operating in a field where companies traditionally juggled multiple disconnected systems, Paylocity (NASDAQ:PCTY) provides cloud-based human capital management and payroll software solutions that help businesses manage their workforce and HR processes.
Why Are We Wary of PCTY?
- Average ARR growth of 12.2% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
- Estimated sales growth of 6.9% for the next 12 months implies demand will slow from its two-year trend
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
At $169.50 per share, Paylocity trades at 4.8x forward price-to-sales. Check out our free in-depth research report to learn more about why PCTY doesn’t pass our bar.
Verizon (VZ)
Trailing 12-Month GAAP Operating Margin: 20.5%
Formed in 1984 as Bell Atlantic after the breakup of Bell System into seven companies, Verizon (NYSE:VZ) is a telecom giant providing a range of communications and internet services.
Why Do We Avoid VZ?
- Sales stagnated over the last five years and signal the need for new growth strategies
- Free cash flow margin is expected to increase by 1.3 percentage points next year, suggesting the company will have more capital to invest or return to shareholders
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Verizon is trading at $43.64 per share, or 8.8x forward P/E. Read our free research report to see why you should think twice about including VZ in your portfolio.
One stock to watch:
Altria (MO)
Trailing 12-Month GAAP Operating Margin: 53.7%
Best known for its Marlboro brand of cigarettes, Altria (NYSE:MO) offers tobacco and nicotine products.
Why Do We Like MO?
- Unique products and pricing power result in a best-in-class gross margin of 72.1%
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 54.1%
- Robust free cash flow margin of 43.8% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
Altria’s stock price of $73.90 implies a valuation ratio of 12.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks we like even more
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.