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. Keeping that in mind, here are three profitable companies to avoid and some better opportunities instead.

VF Corp (VFC)

Trailing 12-Month GAAP Operating Margin: 3.2%

Owner of The North Face, Vans, and Supreme, VF Corp (NYSE: VFC) is a clothing conglomerate specializing in branded lifestyle apparel, footwear, and accessories.

Why Are We Out on VFC?

1. Constant currency revenue growth has disappointed over the past two years and shows demand was soft
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

VF Corp is trading at $13.04 per share, or 12.6x forward P/E. Read our free research report to see why you should think twice about including VFC in your portfolio.

United Airlines (UAL)

Trailing 12-Month GAAP Operating Margin: 9.7%

Founded in 1926, United Airlines Holdings (NASDAQ: UAL) operates a global airline network, providing passenger and cargo air transportation services across domestic and international routes.

Why Do We Think UAL Will Underperform?

1. Sluggish trends in its revenue passenger miles suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 6.8 percentage points
3. Underwhelming 5.6% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $92 per share, United Airlines trades at 8.7x forward P/E. If you’re considering UAL for your portfolio, see our FREE research report to learn more.

Veritex Holdings (VBTX)

Trailing 12-Month GAAP Operating Margin: 33.3%

Founded during the 2009 financial crisis when many banks were failing, Veritex Holdings (NASDAQGM:VBTX) operates Veritex Community Bank, providing commercial and retail banking services to small and medium-sized businesses and professionals in Texas.

Why Does VBTX Worry Us?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.1% annually over the last two years
2. Estimated net interest income growth of 2.6% for the next 12 months implies demand will slow from its four-year trend
3. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 12.8% annually, worse than its revenue

Veritex Holdings’s stock price of $27.60 implies a valuation ratio of 0.9x forward P/B. To fully understand why you should be careful with VBTX, check out our full research report (it’s free).

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. 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). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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