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.
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.
Dollar Tree (DLTR)
Trailing 12-Month GAAP Operating Margin: 7.1%
A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ: DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.
Why Do We Think Twice About DLTR?
- Sales tumbled by 1.1% annually over the last six years, showing consumer trends are working against its favor
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Underwhelming 9.7% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $91.98 per share, Dollar Tree trades at 14.8x forward P/E. If you’re considering DLTR for your portfolio, see our FREE research report to learn more.
Flex (FLEX)
Trailing 12-Month GAAP Operating Margin: 4.8%
Originally known as Flextronics until its 2016 rebranding, Flex (NASDAQ: FLEX) is a global manufacturing partner that designs, engineers, and builds products for companies across industries from medical devices to solar trackers.
Why Are We Cautious About FLEX?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.2% annually over the last two years
- Anticipated sales growth of 3% for the next year implies demand will be shaky
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Flex’s stock price of $58.78 implies a valuation ratio of 18.5x forward P/E. Check out our free in-depth research report to learn more about why FLEX doesn’t pass our bar.
Assured Guaranty (AGO)
Trailing 12-Month GAAP Operating Margin: 49.8%
Serving as a financial safety net for over $11 trillion in debt service payments since its founding in 2003, Assured Guaranty (NYSE: AGO) provides credit protection products that guarantee scheduled payments on municipal bonds, infrastructure projects, and structured finance obligations.
Why Do We Pass on AGO?
- 4.3% annual declines in net premiums earned for the past five years indicates policy sales struggled this cycle
- Forecasted revenue decline of 29.8% for the upcoming 12 months implies demand will fall even further
- Low return on equity reflects management’s struggle to allocate funds effectively
Assured Guaranty is trading at $81.36 per share, or 0.7x forward P/B. To fully understand why you should be careful with AGO, check out our full research report (it’s free for active Edge members).
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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-micro-cap company Tecnoglass (+1,754% 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.
