A company with profits isn’t always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here are three profitable companies to steer clear of and a few better alternatives.
Western Digital (WDC)
Trailing 12-Month GAAP Operating Margin: 20.2%
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Why Should You Dump WDC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 7.9% annually over the last five years
- Gross margin of 14.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability
At $46.24 per share, Western Digital trades at 9.7x forward P/E. If you’re considering WDC for your portfolio, see our FREE research report to learn more.
U-Haul (UHAL)
Trailing 12-Month GAAP Operating Margin: 12.8%
Founded by a husband and wife duo, U-Haul (NYSE: UHAL) is a provider of rental trucks and storage facilities.
Why Is UHAL Risky?
- Annual sales declines of 1.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Free cash flow margin dropped by 38.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
U-Haul is trading at $66.70 per share, or 2.3x trailing 12-month price-to-sales. Check out our free in-depth research report to learn more about why UHAL doesn’t pass our bar.
West Pharmaceutical Services (WST)
Trailing 12-Month GAAP Operating Margin: 19.1%
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE: WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
Why Does WST Fall Short?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 5.7 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
West Pharmaceutical Services’s stock price of $219.46 implies a valuation ratio of 34.3x forward P/E. Dive into our free research report to see why there are better opportunities than WST.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 176% over the last five years.
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 Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
