Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
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.
Mattel (MAT)
Trailing 12-Month GAAP Operating Margin: 11.6%
Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ: MAT) is a global children's entertainment company specializing in the design and production of consumer products.
Why Are We Hesitant About MAT?
- Sales were flat over the last two years, indicating it’s failed to expand its business
- Estimated sales growth of 6.8% for the next 12 months is soft and implies weaker demand
- Diminishing returns on capital suggest its earlier profit pools are drying up
Mattel’s stock price of $19.21 implies a valuation ratio of 11.3x forward P/E. If you’re considering MAT for your portfolio, see our FREE research report to learn more.
Old Dominion Freight Line (ODFL)
Trailing 12-Month GAAP Operating Margin: 24.9%
With its name deriving from the Commonwealth of Virginia’s nickname, Old Dominion (NASDAQ: ODFL) delivers less-than-truckload (LTL) and full-container load freight.
Why Are We Wary of ODFL?
- Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Old Dominion Freight Line is trading at $132.24 per share, or 27.9x forward P/E. To fully understand why you should be careful with ODFL, check out our full research report (it’s free for active Edge members).
Lennar (LEN)
Trailing 12-Month GAAP Operating Margin: 9.7%
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Do We Think LEN Will Underperform?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 19.2% decline in its backlog
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 15.2% annually while its revenue grew
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.9 percentage points
At $121.51 per share, Lennar trades at 14.3x forward P/E. Dive into our free research report to see why there are better opportunities than LEN.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% 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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