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 avoid and some better opportunities instead.

Best Buy (BBY)

Trailing 12-Month GAAP Operating Margin: 2.8%

With humble beginnings as a stereo equipment seller, Best Buy (NYSE: BBY) now sells a broad selection of consumer electronics, appliances, and home office products.

Why Are We Cautious About BBY?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Gross margin of 22.4% is an output of its commoditized inventory
3. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability

Best Buy’s stock price of $68.43 implies a valuation ratio of 11x forward P/E. If you’re considering BBY for your portfolio, see our FREE research report to learn more.

Five Below (FIVE)

Trailing 12-Month GAAP Operating Margin: 8.4%

Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ: FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.

Why Do We Think Twice About FIVE?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Smaller revenue base of $4.04 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $133.02 per share, Five Below trades at 27.9x forward P/E. Dive into our free research report to see why there are better opportunities than FIVE.

Johnson Controls (JCI)

Trailing 12-Month GAAP Operating Margin: 12.5%

Founded after patenting the electric room thermostat, Johnson Controls (NYSE: JCI) specializes in building products and technology solutions, including HVAC systems, fire and security systems, and energy storage.

Why Should You Sell JCI?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Estimated sales growth of 3.6% for the next 12 months is soft and implies weaker demand
3. ROIC of 6.6% reflects management’s challenges in identifying attractive investment opportunities

Johnson Controls is trading at $104.44 per share, or 27.1x forward P/E. To fully understand why you should be careful with JCI, check out our full research report (it’s free).

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

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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-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