A company with profits isn’t always 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:

Generac (GNRC)

Trailing 12-Month GAAP Operating Margin: 12.5%

With its name deriving from a combination of “generating” and “AC”, Generac (NYSE:GNRC) offers generators and other power products for residential, industrial, and commercial use.

Why Are We Out on GNRC?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 3% annually over the last two years

2. Earnings per share have dipped by 1.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $112.45 per share, Generac trades at 13.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than GNRC .

HNI (HNI)

Trailing 12-Month GAAP Operating Margin: 8.6%

With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE:HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.

Why Are We Hesitant About HNI?

1. 3.4% annual revenue growth over the last two years was slower than its business services peers

2. Flat earnings per share over the last five years lagged its peers

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2.3 percentage points

HNI’s stock price of $40.81 implies a valuation ratio of 11.9x forward price-to-earnings. To fully understand why you should be careful with HNI, check out our full research report (it’s free) .

One Stock to Watch:

Universal Display (OLED)

Trailing 12-Month GAAP Operating Margin: 36.9%

Serving major consumer electronics manufacturers, Universal Display (NASDAQ:OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications.

Why Does OLED Stand Out?

1. Offerings are difficult to replicate at scale and result in a best-in-class gross margin of 75.1%

2. Excellent operating margin of 37.3% highlights the efficiency of its business model

3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures