Chipmakers Rise After Fed Chair Powell Hints At Possible September Rate Cut

Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

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 are three profitable companies to avoid and some better opportunities instead.

onsemi (ON)

Trailing 12-Month GAAP Operating Margin: 7.4%

Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.

Why Does ON Give Us Pause?

• Products and services are facing significant end-market challenges during this cycle as sales have declined by 12.5% annually over the last two years
• Projected sales decline of 4.5% over the next 12 months indicates demand will continue deteriorating
• Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 4.3 percentage points

At $51.09 per share, onsemi trades at 19.6x forward P/E. Dive into our free research report to see why there are better opportunities than ON.

Otis (OTIS)

Trailing 12-Month GAAP Operating Margin: 13.1%

Credited with inventing the first hydraulic passenger elevator, Otis Worldwide is an elevator and escalator manufacturing, installation and service company.

Why Are We Wary of OTIS?

• Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
• Projected sales growth of 4.1% for the next 12 months suggests sluggish demand
• 1.9 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

Otis’s stock price of $87.62 implies a valuation ratio of 20.2x forward P/E. To fully understand why you should be careful with OTIS, check out our full research report (it’s free).

Norfolk Southern (NSC)

Trailing 12-Month GAAP Operating Margin: 41.5%

Starting with a single route from Virginia to North Carolina, Norfolk Southern is a freight transportation company operating a major railroad network across the eastern United States.

Why Do We Think NSC Will Underperform?

• Underwhelming unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
• Earnings per share have contracted by 4.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
• Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 7.8 percentage points

Norfolk Southern is trading at $280.79 per share, or 20.9x forward P/E. Dive into our free research report to see why there are better opportunities than NSC.

Stocks We Like More

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return).

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

Many investors pay attention to mid-cap stocks because they have established business models and expansive market opportunities. However, their paths to becoming $100 billion corporations are ripe with competition, ranging from giants with vast resources to agile upstarts eager to disrupt the status quo.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three mid-cap stocks to swipe left on and some alternatives you should look into instead.

onsemi (ON)

Market Cap: $21.22 billion

Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.

Why Do We Think Twice About ON?

• Sales tumbled by 12.5% annually over the last two years, showing market trends are working against its favor during this cycle
• Forecasted revenue decline of 4.5% for the upcoming 12 months implies demand will fall even further
• Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 4.3 percentage points

onsemi’s stock price of $51.95 implies a valuation ratio of 19.9x forward P/E. Read our free research report to see why you should think twice about including ON in your portfolio.

Brown-Forman (BF.B)

Market Cap: $14.55 billion

Best known for its Jack Daniel’s whiskey, Brown-Forman (NYSE:BF.B) is an alcoholic beverage company with a broad portfolio of brands in wines and spirits.

Why Are We Wary of BF.B?

• Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
• Forecasted revenue decline of 3% for the upcoming 12 months implies demand will fall off a cliff
• Efficiency has decreased over the last year as its operating margin fell by 6 percentage points

Brown-Forman is trading at $30.85 per share, or 15.9x forward P/E. To fully understand why you should be careful with BF.B, check out our full research report (it’s free).

Jacobs Solutions (J)

Market Cap: $18.19 billion

With a workforce of approximately 45,000 professionals tackling complex challenges from water scarcity to cybersecurity, Jacobs Solutions provides engineering, consulting, and technical services focused on infrastructure, sustainability, and advanced technology solutions.

Why Should You Dump J?

• Annual sales declines of 2.5% for the past five years show its products and services struggled to connect with the market during this cycle
• Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 4% annually, worse than its revenue
• Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $152.18 per share, Jacobs Solutions trades at 22.7x forward P/E. If you’re considering J for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return).

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.