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 that don’t make the cut and some better opportunities instead.
FedEx (FDX)
Trailing 12-Month GAAP Operating Margin: 6%
Sporting one of the largest air cargo fleets in the world, FedEx (NYSE: FDX) is a global provider of parcel and cargo delivery services.
Why Are We Out on FDX?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Low free cash flow margin of 2.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $234 per share, FedEx trades at 12.5x forward P/E. Check out our free in-depth research report to learn more about why FDX doesn’t pass our bar.
Resideo (REZI)
Trailing 12-Month GAAP Operating Margin: 7.9%
Resideo Technologies, Inc. (NYSE: REZI) is a manufacturer and distributor of technology-driven products and solutions for home comfort, energy management, water management, and safety and security.
Why Are We Hesitant About REZI?
- Estimated sales growth of 2.4% for the next 12 months implies demand will slow from its two-year trend
- Poor free cash flow margin of 3.9% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Waning returns on capital imply its previous profit engines are losing steam
Resideo’s stock price of $40.41 implies a valuation ratio of 14.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than REZI.
State Street (STT)
Trailing 12-Month GAAP Operating Margin: 28.5%
Dating back to 1792 when Boston's Long Wharf was the center of global shipping and trade, State Street (NYSE: STT) provides custody, investment management, and other financial services to institutional investors like pension funds, asset managers, and central banks worldwide.
Why Do We Pass on STT?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.3% for the last five years
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 5.2% annually
- Below-average return on equity indicates management struggled to find compelling investment opportunities
State Street is trading at $113.34 per share, or 10.7x forward P/E. Read our free research report to see why you should think twice about including STT in your portfolio.
Stocks We Like More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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).
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