Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here are three profitable companies to avoid and some better opportunities instead.

Wix (WIX)

Trailing 12-Month GAAP Operating Margin: 7.7%

Powering over 263 million registered users worldwide with its AI-driven tools, Wix (NASDAQ: WIX) provides a cloud-based platform that helps individuals and businesses create and manage professional websites without requiring coding skills.

Why Are We Wary of WIX?

1. Average billings growth of 14% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
2. Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 68.4%
3. Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient

At $137.90 per share, Wix trades at 3.8x forward price-to-sales. If you’re considering WIX for your portfolio, see our FREE research report to learn more.

eBay (EBAY)

Trailing 12-Month GAAP Operating Margin: 21.4%

Originally known as the first online auction site, eBay (NASDAQ: EBAY) is one of the world’s largest online marketplaces.

Why Does EBAY Give Us Pause?

1. Active Buyers have stagnated over the last two years, indicating its platform may be struggling to differentiate itself from competitors
2. Monetization and engagement metrics haven’t budged over the last two years, suggesting it may need to increase the efficacy of its platform
3. Costs have risen faster than its revenue over the last few years, causing its EBITDA margin to decline by 4.3 percentage points

eBay is trading at $89.13 per share, or 11.9x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than EBAY.

Coty (COTY)

Trailing 12-Month GAAP Operating Margin: 4.1%

With a portfolio boasting many household brands, Coty (NYSE: COTY) is a beauty products powerhouse spanning cosmetics, fragrances, and skincare.

Why Do We Steer Clear of COTY?

1. Organic sales performance over the past one years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Projected sales are flat for the next 12 months, implying demand will slow from its three-year trend
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Coty’s stock price of $4.21 implies a valuation ratio of 9.5x forward P/E. Check out our free in-depth research report to learn more about why COTY doesn’t pass our bar.

Stocks We Like More

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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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