While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".

Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here is one profitable company that generates reliable profits without sacrificing growth and two that may struggle to keep up.

Two Stocks to Sell:

Victoria's Secret (VSCO)

Trailing 12-Month GAAP Operating Margin: 5%

Spun off from L Brands in 2020, Victoria’s Secret (NYSE:VSCO) is an intimate clothing and beauty retailer that sells its own brands of lingerie, undergarments, and personal fragrances.

Why Does VSCO Fall Short?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations

2. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue

3. Poor expense management has led to an operating margin of 4.5% that is below the industry average

Victoria's Secret is trading at $18.50 per share, or 6.7x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than VSCO .

Kimberly-Clark (KMB)

Trailing 12-Month GAAP Operating Margin: 15.8%

Originally founded as a Wisconsin paper mill in 1872, Kimberly-Clark (NYSE:KMB) is now a household products powerhouse known for personal care and tissue products.

Why Are We Hesitant About KMB?

1. Flat unit sales over the past two years suggest it might have to lower prices to stimulate growth

2. Sales are projected to be flat over the next 12 months and imply weak demand

3. Free cash flow margin has stayed in place over the last year

Kimberly-Clark’s stock price of $131.40 implies a valuation ratio of 17.3x forward price-to-earnings. To fully understand why you should be careful with KMB, check out our full research report (it’s free) .

One Stock to Buy:

Monolithic Power Systems (MPWR)

Trailing 12-Month GAAP Operating Margin: 24.4%

Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ:MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.

Why Should You Buy MPWR?

1. Annual revenue growth of 10.9% over the past two years was outstanding, reflecting market share gains this cycle

2. Strong free cash flow margin of 30.4% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business

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