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 steer clear of and a few better alternatives.
APi (APG)
Trailing 12-Month GAAP Operating Margin: 6.6%
Started in 1926 as an insulation contractor, APi (NYSE: APG) provides life safety solutions and specialty services for buildings and infrastructure.
Why Does APG Give Us Pause?
- Annual revenue growth of 4.2% over the last two years was below our standards for the industrials sector
- 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
- Underwhelming 3.3% return on capital reflects management’s difficulties in finding profitable growth opportunities
APi’s stock price of $36.20 implies a valuation ratio of 24.4x forward P/E. Read our free research report to see why you should think twice about including APG in your portfolio.
Addus HomeCare (ADUS)
Trailing 12-Month GAAP Operating Margin: 9.1%
Serving approximately 66,000 clients across 22 states with a focus on "dual eligible" Medicare and Medicaid beneficiaries, Addus HomeCare (NASDAQ: ADUS) provides in-home personal care, hospice, and home health services to elderly, chronically ill, and disabled individuals.
Why Are We Hesitant About ADUS?
- Subscale operations are evident in its revenue base of $1.27 billion, meaning it has fewer distribution channels than its larger rivals
At $115 per share, Addus HomeCare trades at 18x forward P/E. Dive into our free research report to see why there are better opportunities than ADUS.
Cognex (CGNX)
Trailing 12-Month GAAP Operating Margin: 14.2%
Founded in 1981 when computer vision was in its infancy, Cognex (NASDAQ: CGNX) develops machine vision systems and software that help manufacturers and logistics companies automate quality inspection and tracking of products.
Why Are We Cautious About CGNX?
- Annual revenue growth of 2% over the last two years was below our standards for the business services sector
- 15.8 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Waning returns on capital imply its previous profit engines are losing steam
Cognex is trading at $44.30 per share, or 45.2x forward P/E. To fully understand why you should be careful with CGNX, check out our full research report (it’s free).
Stocks We Like More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out 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 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 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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