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.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here are three profitable companies to steer clear of and a few better alternatives.
Amkor (AMKR)
Trailing 12-Month GAAP Operating Margin: 6.4%
Operating through a largely Asian facility footprint, Amkor Technologies (NASDAQ: AMKR) provides outsourced packaging and testing for semiconductors.
Why Are We Hesitant About AMKR?
- Annual sales declines of 4.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Gross margin of 14.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Poor free cash flow margin of 6.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Amkor is trading at $32.80 per share, or 23.2x forward P/E. Read our free research report to see why you should think twice about including AMKR in your portfolio.
Warner Music Group (WMG)
Trailing 12-Month GAAP Operating Margin: 10.7%
Launching the careers of legendary artists like Frank Sinatra, Warner Music Group (NASDAQ: WMG) is a music company managing a diverse portfolio of artists, recordings, and music publishing services worldwide.
Why Do We Think Twice About WMG?
- Muted 4.3% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
- Anticipated sales growth of 4.9% for the next year implies demand will be shaky
- Low returns on capital reflect management’s struggle to allocate funds effectively
Warner Music Group’s stock price of $33.69 implies a valuation ratio of 26.5x forward P/E. If you’re considering WMG for your portfolio, see our FREE research report to learn more.
XPO (XPO)
Trailing 12-Month GAAP Operating Margin: 8.4%
Owning a mobile game simulating freight operations for the Tour de France, XPO (NYSE: XPO) is a transportation company specializing in expedited shipping services.
Why Is XPO Risky?
- Sales tumbled by 6.5% annually over the last five years, showing market trends are working against its favor during this cycle
- Flat earnings per share over the last two years lagged its peers
- 7.2 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 $132.83 per share, XPO trades at 32.8x forward P/E. Dive into our free research report to see why there are better opportunities than XPO.
Stocks We Like More
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 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
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.
