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".

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.

Walmart (WMT)

Trailing 12-Month GAAP Operating Margin: 4.3%

Known for its large-format Supercenters, Walmart (NYSE: WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.

Why Is WMT Not Exciting?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.8% over the last six years was below our standards for the consumer retail sector
2. Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 24.7%
3. Performance over the past six years shows its incremental sales were much less profitable, as its earnings per share fell by 10.9% annually

Walmart’s stock price of $98.41 implies a valuation ratio of 36.8x forward P/E. To fully understand why you should be careful with WMT, check out our full research report (it’s free).

Cincinnati Financial (CINF)

Trailing 12-Month GAAP Operating Margin: 23.3%

Founded in 1950 by independent insurance agents seeking stable market options for their clients, Cincinnati Financial (NASDAQ: CINF) provides property casualty insurance, life insurance, and related financial services through independent agencies across 46 states.

Why Are We Cautious About CINF?

1. Annual sales growth of 6.8% over the last five years lagged behind its insurance peers as its large revenue base made it difficult to generate incremental demand
2. Operational productivity has decreased over the last four years as its combined ratio worsened by 8.4 percentage points
3. Estimated book value per share growth of 2.8% for the next 12 months implies profitability will slow from its two-year trend

At $144.39 per share, Cincinnati Financial trades at 1.6x forward P/B. If you’re considering CINF for your portfolio, see our FREE research report to learn more.

Walker & Dunlop (WD)

Trailing 12-Month GAAP Operating Margin: 10.8%

Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop (NYSE: WD) provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.

Why Do We Think Twice About WD?

1. 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
2. Earnings per share fell by 4.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 3.9% annually over the last five years

Walker & Dunlop is trading at $74.46 per share, or 1.4x forward P/B. Dive into our free research report to see why there are better opportunities than WD.

Stocks We Like More

Donald Trump’s April 2024 "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 Growth Stocks for this month. 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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