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 balances growth and profitability and two that may face some trouble.
Two Stocks to Sell:
Labcorp (LH)
Trailing 12-Month GAAP Operating Margin: 10.4%
With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE:LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.
Why Are We Wary of LH?
- Annual sales declines of 2.6% for the past five years show its products and services struggled to connect with the market during this cycle
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 12.4% annually, worse than its revenue
Labcorp’s stock price of $321.64 implies a valuation ratio of 17.2x forward P/E. Check out our free in-depth research report to learn more about why LH doesn’t pass our bar.
Walker & Dunlop (WD)
Trailing 12-Month GAAP Operating Margin: 2.6%
Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop (NYSE:WD) provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.
Why Are We Out on WD?
- Net interest income tumbled by 41.6% annually over the last five years, showing market trends are working against it during this cycle
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 13.7% annually
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 8.5% annually over the last five years
At $41.37 per share, Walker & Dunlop trades at 0.8x forward P/B. Read our free research report to see why you should think twice about including WD in your portfolio.
One Stock to Watch:
Garrett Motion (GTX)
Trailing 12-Month GAAP Operating Margin: 14.2%
A key player in the transition to cleaner vehicles, Garrett Motion (NYSE:GTX) designs and manufactures turbochargers, air compressors, and electric motor technologies for vehicle manufacturers and industrial applications.
Why Are We Positive on GTX?
- Earnings per share have massively outperformed its peers over the last two years, increasing by 44.4% annually
- Free cash flow margin expanded by 6.8 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Rising returns on capital show management is finding more attractive investment opportunities
Garrett Motion is trading at $27.49 per share, or 9.2x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.