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 steer clear of and a few better alternatives.
MarineMax (HZO)
Trailing 12-Month GAAP Operating Margin: 2%
Appropriately headquartered in Clearwater, Florida, MarineMax (NYSE: HZO) sells boats, yachts, and other marine products.
Why Do We Think Twice About HZO?
- Store closures and poor same-store sales reveal weak demand and a push toward operational efficiency
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
MarineMax is trading at $26.52 per share, or 16.8x forward P/E. Read our free research report to see why you should think twice about including HZO in your portfolio.
Luxfer (LXFR)
Trailing 12-Month GAAP Operating Margin: 9.5%
With its magnesium alloys used in the construction of the famous Spirit of St. Louis aircraft, Luxfer (NYSE: LXFR) offers specialized materials, components, and gas containment devices to various industries.
Why Should You Dump LXFR?
- Annual sales declines of 1.9% for the past two years show its products and services struggled to connect with the market during this cycle
- Free cash flow margin shrank by 7.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital imply its previous profit engines are losing steam
At $13.58 per share, Luxfer trades at 12.5x forward P/E. Dive into our free research report to see why there are better opportunities than LXFR.
AXIS Capital (AXS)
Trailing 12-Month GAAP Operating Margin: 16.1%
Founded in the aftermath of the 9/11 attacks when insurance capacity was scarce, AXIS Capital Holdings Limited (NYSE: AXS) is a global specialty insurer and reinsurer that provides coverage for complex risks across property, liability, professional lines, cyber, and other specialty markets.
Why Are We Wary of AXS?
- Muted 4.9% annual revenue growth over the last five years shows its demand lagged behind its insurance peers
- 3.4% annualized net premiums earned growth over the last two years lagged behind its insurance peers
- ROE of 9.7% reflects management’s challenges in identifying attractive investment opportunities
AXIS Capital’s stock price of $91.14 implies a valuation ratio of 1.2x forward P/B. To fully understand why you should be careful with AXS, check out our full research report (it’s free for active Edge members).
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-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.
