Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.

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 that don’t make the cut and some better opportunities instead.

Universal Display (OLED)

Trailing 12-Month GAAP Operating Margin: 38.2%

Serving major consumer electronics manufacturers, Universal Display (NASDAQ: OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications.

Why Does OLED Give Us Pause?

1. Estimated sales growth of 4.2% for the next 12 months implies demand will slow from its two-year trend
2. Free cash flow margin shrank by 3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Universal Display is trading at $95.37 per share, or 19.5x forward P/E. Dive into our free research report to see why there are better opportunities than OLED.

American Eagle (AEO)

Trailing 12-Month GAAP Operating Margin: 4.1%

With a heavy focus on denim, American Eagle Outfitters (NYSE: AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.

Why Are We Cautious About AEO?

1. Limited expansion of stores suggests it’s prioritizing efficiency over growth at this stage
2. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 3.9 percentage points
3. ROIC of 8.8% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $17.20 per share, American Eagle trades at 9.9x forward P/E. To fully understand why you should be careful with AEO, check out our full research report (it’s free).

Novavax (NVAX)

Trailing 12-Month GAAP Operating Margin: 40.3%

Pioneering a nanoparticle technology that mimics the molecular structure of disease pathogens, Novavax (NASDAQ: NVAX) develops and commercializes protein-based vaccines for infectious diseases, with a primary focus on its COVID-19 vaccine and combination respiratory vaccine candidates.

Why Does NVAX Worry Us?

1. Sales trends were unexciting over the last two years as its 6.9% annual growth was below the typical healthcare company
2. Forecasted revenue decline of 66.2% for the upcoming 12 months implies demand will fall off a cliff
3. Free cash flow margin shrank by 45.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Novavax’s stock price of $10.05 implies a valuation ratio of 4.6x forward price-to-sales. Read our free research report to see why you should think twice about including NVAX in your portfolio.

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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.