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 steer clear of and a few better alternatives.

Hertz (HTZ)

Trailing 12-Month GAAP Operating Margin: 2%

Started with a dozen Model T Fords, Hertz (NASDAQ: HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.

Why Do We Avoid HTZ?

1. Annual sales declines of 3.8% for the past two years show its products and services struggled to connect with the market during this cycle
2. Waning returns on capital imply its previous profit engines are losing steam

Hertz’s stock price of $2.07 implies a valuation ratio of 109.5x forward EV-to-EBITDA. To fully understand why you should be careful with HTZ, check out our full research report (it’s free).

Arrow Electronics (ARW)

Trailing 12-Month GAAP Operating Margin: 3.1%

Founded as a single retail store, Arrow Electronics (NYSE: ARW) provides electronic components and enterprise computing solutions to businesses globally.

Why Should You Dump ARW?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 1.8% over the last five years was below our standards for the industrials sector
2. Earnings per share fell by 1.5% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
3. Eroding returns on capital suggest its historical profit centers are aging

At $206.67 per share, Arrow Electronics trades at 10.5x forward P/E. Dive into our free research report to see why there are better opportunities than ARW.

OPENLANE (OPLN)

Trailing 12-Month GAAP Operating Margin: 10.9%

Facilitating the sale of approximately 1.3 million used vehicles in 2023, OPENLANE (NYSE: OPLN) operates digital marketplaces that connect sellers and buyers of used vehicles across North America and Europe, facilitating wholesale transactions.

Why Are We Wary of OPLN?

1. Sales were flat over the last five years, indicating it’s failed to expand this cycle
2. Below-average returns on capital indicate management struggled to find compelling investment opportunities
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

OPENLANE is trading at $39.92 per share, or 28.7x forward P/E. If you’re considering OPLN for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.

Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.

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.