Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.

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.

Trex (TREX)

Trailing 12-Month GAAP Operating Margin: 22%

Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE: TREX) makes wood-alternative decking, railing, and patio furniture.

Why Is TREX Risky?

1. Sales trends were unexciting over the last two years as its 3.6% annual growth was below the typical industrials company
2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 5.3 percentage points
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Trex’s stock price of $42.75 implies a valuation ratio of 26.1x forward P/E. To fully understand why you should be careful with TREX, check out our full research report (it’s free).

Benchmark (BHE)

Trailing 12-Month GAAP Operating Margin: 3.6%

Operating as a critical behind-the-scenes partner for complex technology products since 1979, Benchmark Electronics (NYSE: BHE) provides advanced manufacturing, engineering, and technology solutions for original equipment manufacturers across aerospace, medical, industrial, and technology sectors.

Why Are We Cautious About BHE?

1. Annual sales declines of 3.2% for the past two years show its products and services struggled to connect with the market during this cycle
2. Low free cash flow margin of 0.7% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. ROIC of 7.2% reflects management’s challenges in identifying attractive investment opportunities

At $65.05 per share, Benchmark trades at 24.9x forward P/E. If you’re considering BHE for your portfolio, see our FREE research report to learn more.

Assurant (AIZ)

Trailing 12-Month GAAP Operating Margin: 8.5%

With roots dating back to 1892 when it was founded by a Civil War veteran, Assurant (NYSE: AIZ) provides specialized insurance products and services that protect major consumer purchases like mobile devices, vehicles, homes, and appliances.

Why Does AIZ Worry Us?

1. Large revenue base constrains its growth potential, as seen in its unexciting 4.8% annualized increases in net premiums earned over the last five years fell below our expectations for the insurance sector
2. Earnings per share lagged its peers over the last two years as they only grew by 13.1% annually
3. Annual book value per share growth of 2.8% over the last five years lagged behind its insurance peers as its large balance sheet made it difficult to generate incremental capital growth

Assurant is trading at $227.76 per share, or 1.8x forward P/B. Dive into our free research report to see why there are better opportunities than AIZ.

Stocks We Like More

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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.