Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here is one profitable company that balances growth and profitability and two best left off your watchlist.
Two Stocks to Sell:
DigitalOcean (DOCN)
Trailing 12-Month GAAP Operating Margin: 15.7%
Built for simplicity in a world of complex cloud solutions, DigitalOcean (NYSE: DOCN) provides a simplified cloud computing platform that enables developers and small businesses to quickly deploy and scale applications.
Why Does DOCN Give Us Pause?
- Revenue increased by 19.2% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Competitive market dynamics make it difficult to retain customers, leading to a weak 98.8% net revenue retention rate
- Gross margin of 59.7% reflects its high servicing costs
DigitalOcean is trading at $32.89 per share, or 3.5x forward price-to-sales. If you’re considering DOCN for your portfolio, see our FREE research report to learn more.
Fresh Del Monte Produce (FDP)
Trailing 12-Month GAAP Operating Margin: 4%
Translating to "of the mountain" in Spanish, Fresh Del Monte (NYSE: FDP) is a leader in providing high-quality, sustainably grown fresh fruits and vegetables.
Why Do We Avoid FDP?
- Products fail to spark excitement with consumers, as seen in its flat sales over the last three years
- Gross margin of 8.3% is below its competitors, leaving less money to invest in areas like marketing and production facilities
- Underwhelming 5.4% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $35.90 per share, Fresh Del Monte Produce trades at 15.9x forward EV-to-EBITDA. To fully understand why you should be careful with FDP, check out our full research report (it’s free).
One Stock to Watch:
Griffon (GFF)
Trailing 12-Month GAAP Operating Margin: 18%
Initially in the defense industry, Griffon (NYSE: GFF) is a now diversified company specializing in home improvement, professional equipment, and building products.
Why Does GFF Stand Out?
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Incremental sales over the last five years have been highly profitable as its earnings per share increased by 28.8% annually, topping its revenue gains
- Free cash flow margin expanded by 13 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Griffon’s stock price of $81.20 implies a valuation ratio of 13.3x 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-micro-cap company Tecnoglass (+1,754% 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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