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".

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are three profitable companies to avoid and some better opportunities instead.

ADT (ADT)

Trailing 12-Month GAAP Operating Margin: 24.8%

Founded in 1874 and headquartered in Boca Raton, Florida, ADT (NYSE: ADT) is a provider of security, automation, and smart home solutions, offering comprehensive services for home and business protection.

Why Does ADT Fall Short?

1. Sluggish trends in its customers suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Projected sales growth of 4.3% for the next 12 months suggests sluggish demand
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $8.18 per share, ADT trades at 9.5x forward P/E. Dive into our free research report to see why there are better opportunities than ADT.

Guess (GES)

Trailing 12-Month GAAP Operating Margin: 5.3%

Flexing the iconic upside-down triangle logo with a question mark, Guess (NYSE: GES) is a global fashion brand known for its trendy clothing, accessories, and denim wear.

Why Do We Steer Clear of GES?

1. Lackluster 4.9% annual revenue growth over the last five years indicates the company is losing ground to competitors
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.9% for the last two years
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Guess’s stock price of $11.96 implies a valuation ratio of 7.3x forward P/E. To fully understand why you should be careful with GES, check out our full research report (it’s free).

VSE Corporation (VSEC)

Trailing 12-Month GAAP Operating Margin: 7.5%

With roots dating back to 1959 and a strategic focus on extending the life of transportation assets, VSE Corporation (NASDAQ: VSEC) provides aftermarket parts distribution and maintenance, repair, and overhaul services for aircraft and vehicle fleets in commercial and government markets.

Why Does VSEC Give Us Pause?

1. High input costs result in an inferior gross margin of 12.3% that must be offset through higher volumes
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. Low returns on capital reflect management’s struggle to allocate funds effectively

VSE Corporation is trading at $135.59 per share, or 36.9x forward P/E. Check out our free in-depth research report to learn more about why VSEC doesn’t pass our bar.

Stocks We Like More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. 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-small-cap company Exlservice (+354% 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