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”.
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 best left off your watchlist.
Two Stocks to Sell:
Microchip Technology (MCHP)
Trailing 12-Month GAAP Operating Margin: 15.5%
Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.
Why Do We Avoid MCHP?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 11.8% annually over the last two years
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- 15 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $75.53 per share, Microchip Technology trades at 19.2x forward P/E. To fully understand why you should be careful with MCHP, check out our full research report (it’s free).
OPENLANE (OPLN)
Trailing 12-Month GAAP Operating Margin: 11.5%
Facilitating the sale of approximately 1.3 million used vehicles in 2023, OPENLANE (NYSE:OPLN) operates digital marketplaces that connect sellers and buyers of used vehicles across North America and Europe, facilitating wholesale transactions.
Why Is OPLN Not Exciting?
- Annual revenue growth of 2.1% over the last five years was below our standards for the business services sector
- ROIC of 3.2% reflects management’s challenges in identifying attractive investment opportunities
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
OPENLANE’s stock price of $36.74 implies a valuation ratio of 22.6x forward P/E. Read our free research report to see why you should think twice about including OPLN in your portfolio.
One Stock to Watch:
CoreCivic (CXW)
Trailing 12-Month GAAP Operating Margin: 9.9%
Originally founded in 1983 as the first private prison company in the United States, CoreCivic (NYSE:CXW) operates correctional facilities, detention centers, and residential reentry programs for government agencies across the United States.
Why Do We Like CXW?
- Market share has increased this cycle as its 12.4% annual revenue growth over the last two years was exceptional
- Exciting sales outlook for the upcoming 12 months calls for 15.1% growth, an acceleration from its two-year trend
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
CoreCivic is trading at $32.91 per share, or 15.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.