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. Keeping that in mind, here are three profitable companies to steer clear of and a few better alternatives.
Church & Dwight (CHD)
Trailing 12-Month GAAP Operating Margin: 17.3%
Best known for its Arm & Hammer baking soda, Church & Dwight (NYSE: CHD) is a household and personal care products company with a vast portfolio that spans laundry detergent to toothbrushes to hair removal creams.
Why Are We Wary of CHD?
- Lackluster 4.1% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
At $95.63 per share, Church & Dwight trades at 25.2x forward P/E. Check out our free in-depth research report to learn more about why CHD doesn’t pass our bar.
XPO (XPO)
Trailing 12-Month GAAP Operating Margin: 8.2%
Owning a mobile game simulating freight operations for the Tour de France, XPO (NYSE: XPO) is a transportation company specializing in expedited shipping services.
Why Are We Cautious About XPO?
- 2.8% annual revenue growth over the last two years was slower than its industrials peers
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 19.8%
- Low free cash flow margin of 1.6% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
XPO is trading at $201.29 per share, or 39.7x forward P/E. To fully understand why you should be careful with XPO, check out our full research report (it’s free).
Lazard (LAZ)
Trailing 12-Month GAAP Operating Margin: 11.8%
Tracing its roots back to 1848 when it began as a dry goods merchant in New Orleans, Lazard (NYSE: LAZ) is a global financial advisory and asset management firm that provides strategic advice to corporations, governments, institutions, and wealthy individuals.
Why Does LAZ Fall Short?
- 3.2% annual revenue growth over the last five years was slower than its financials peers
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 9.9% annually
Lazard’s stock price of $44.28 implies a valuation ratio of 13.1x forward P/E. Read our free research report to see why you should think twice about including LAZ in your portfolio.
Stocks We Like More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth 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.
