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. Keeping that in mind, here is one profitable company that generates reliable profits without sacrificing growth and two that may face some trouble.

Two Stocks to Sell:

Rockwell Automation (ROK)

Trailing 12-Month GAAP Operating Margin: 19%

One of the first companies to address industrial automation, Rockwell Automation (NYSE: ROK) sells products that help customers extract more efficiency from their machinery.

Why Do We Think Twice About ROK?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.1%
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Rockwell Automation is trading at $455.63 per share, or 33.3x forward P/E. If you’re considering ROK for your portfolio, see our FREE research report to learn more.

Select Medical (SEM)

Trailing 12-Month GAAP Operating Margin: 5.8%

With a nationwide network spanning 46 states and over 2,700 healthcare facilities, Select Medical (NYSE: SEM) operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States.

Why Does SEM Give Us Pause?

1. Declining admissions over the past two years imply it may need to invest in improvements to get back on track
2. Earnings per share have dipped by 14.1% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $16.50 per share, Select Medical trades at 12.5x forward P/E. Check out our free in-depth research report to learn more about why SEM doesn’t pass our bar.

One Stock to Watch:

Xylem (XYL)

Trailing 12-Month GAAP Operating Margin: 13.6%

Formed through a spinoff, Xylem (NYSE: XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.

Why Do We Like XYL?

1. Impressive 12.7% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Additional sales over the last five years increased its profitability as the 16.7% annual growth in its earnings per share outpaced its revenue
3. Free cash flow margin expanded by 5.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

Xylem’s stock price of $110.54 implies a valuation ratio of 19.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

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.

But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week - FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.