Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.

WD-40 (WDFC)

Trailing 12-Month GAAP Operating Margin: 16.3%

Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQ: WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.

Why Does WDFC Give Us Pause?

1. 6.7% annual revenue growth over the last three years was slower than its consumer staples peers
2. Smaller revenue base of $612.5 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 4.5 percentage points

At $190.63 per share, WD-40 trades at 34.9x forward P/E. Dive into our free research report to see why there are better opportunities than WDFC.

Simply Good Foods (SMPL)

Trailing 12-Month GAAP Operating Margin: 14.9%

Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ: SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.

Why Are We Wary of SMPL?

1. Smaller revenue base of $1.46 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
2. Estimated sales growth of 1.3% for the next 12 months implies demand will slow from its three-year trend
3. 5.5 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position

Simply Good Foods’s stock price of $24.20 implies a valuation ratio of 12.8x forward P/E. Check out our free in-depth research report to learn more about why SMPL doesn’t pass our bar.

Walker & Dunlop (WD)

Trailing 12-Month GAAP Operating Margin: 11.9%

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 Are We Cautious About WD?

1. Annual net interest income declines of 56.7% for the past five years show its loan book struggled during this cycle
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 6.9% annually
3. Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 4.5% annually over the last five years

Walker & Dunlop is trading at $81.42 per share, or 1.5x forward P/B. Read our free research report to see why you should think twice about including WD in your portfolio.

Stocks We Like More

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Take advantage of the rebound by checking 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-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

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