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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".

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 generates reliable profits without sacrificing growth and two best left off your watchlist.

Two Stocks to Sell:

Zoom (ZM)

Trailing 12-Month GAAP Operating Margin: 17.4%

Started by Eric Yuan who once ran engineering for Cisco’s video conferencing business, Zoom (NASDAQ:ZM) offers an easy to use, cloud-based platform for video conferencing, audio conferencing and screen sharing.

Why Do We Think Twice About ZM?

1. Underwhelming ARR growth of 3.1% over the last year suggests the company faced challenges in acquiring and retaining long-term customers

2. Estimated sales growth of 2.5% for the next 12 months implies demand will slow from its three-year trend

3. Free cash flow margin is forecasted to shrink by 5 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors

Zoom is trading at $78.50 per share, or 5.2x forward price-to-sales. To fully understand why you should be careful with ZM, check out our full research report (it’s free).

YETI (YETI)

Trailing 12-Month GAAP Operating Margin: 13.4%

Founded by two brothers from Texas, YETI (NYSE:YETI) specializes in durable outdoor goods including coolers, drinkware, and other gear tailored to adventure enthusiasts.

Why Does YETI Fall Short?

1. Annual revenue growth of 7.1% over the last two years was below our standards for the consumer discretionary sector

2. Anticipated sales growth of 6.2% for the next year implies demand will be shaky

3. Eroding returns on capital suggest its historical profit centers are aging

YETI’s stock price of $28.82 implies a valuation ratio of 9.9x forward P/E. If you’re considering YETI for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

Alphabet (GOOGL)

Trailing 12-Month GAAP Operating Margin: 32.7%

Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ:GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.

Why Are We Bullish on GOOGL?

1. Alphabet’s dominant Google Search sits on the pantheon of the best businesses ever. This is reflected in its robust long-term revenue growth and elite operating margin.

2. The company’s profit margins have become even higher over time, speaking to its scale advantages and operating efficiency not only in its core Search business but also in Google Cloud Platform and YouTube.

3. Revenue growth and increasing operating margins are the key ingredients for strong EPS growth. Google has these, and when also factoring in its share repurchases, you can see why EPS has exploded over the long term.