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. That said, here are three profitable companies to avoid and some better opportunities instead.

Church & Dwight (CHD)

Trailing 12-Month GAAP Operating Margin: 17.4%

Best known for its Arm & Hammer baking soda, Church & Dwight (NYSE: CHD) is a household and personal care products company with a vast portfolio that spans laundry detergent to toothbrushes to hair removal creams.

Why Is CHD Not Exciting?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.8%
3. Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 4.7% annually

Church & Dwight’s stock price of $83.30 implies a valuation ratio of 22.5x forward P/E. Dive into our free research report to see why there are better opportunities than CHD.

Edgewell Personal Care (EPC)

Trailing 12-Month GAAP Operating Margin: 4.3%

Boasting brands such as Banana Boat, Schick, and Skintimate, Edgewell Personal Care (NYSE: EPC) sells personal care products in the skin and sun care, shave, and feminine care categories.

Why Do We Pass on EPC?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Efficiency has decreased over the last year as its operating margin fell by 4.5 percentage points
3. Free cash flow margin dropped by 5.9 percentage points over the last year, implying the company became more capital intensive as competition picked up

At $17.34 per share, Edgewell Personal Care trades at 7x forward P/E. To fully understand why you should be careful with EPC, check out our full research report (it’s free for active Edge members).

Gilead Sciences (GILD)

Trailing 12-Month GAAP Operating Margin: 36.1%

From its groundbreaking work in developing the first single-tablet regimens for HIV treatment, Gilead Sciences (NASDAQ: GILD) develops and markets innovative medicines for life-threatening diseases including HIV, viral hepatitis, COVID-19, and cancer.

Why Do We Think Twice About GILD?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 3% for the last two years
2. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 6.9 percentage points
3. Waning returns on capital imply its previous profit engines are losing steam

Gilead Sciences is trading at $121.26 per share, or 14.1x forward P/E. Check out our free in-depth research report to learn more about why GILD doesn’t pass our bar.

Stocks We Like More

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. 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 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

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