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.
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.
G-III (GIII)
Trailing 12-Month GAAP Operating Margin: 6.9%
Founded as a small leather goods business, G-III (NASDAQ: GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.
Why Do We Avoid GIII?
- Muted 5.8% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Low free cash flow margin of 10.9% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Stagnant returns on capital show management has failed to improve the company’s business quality
At $29.86 per share, G-III trades at 11.1x forward P/E. If you’re considering GIII for your portfolio, see our FREE research report to learn more.
American Express Global Business Travel (GBTG)
Trailing 12-Month GAAP Operating Margin: 5.2%
Originally spun off from American Express in 2014 but maintaining the Amex GBT brand, Global Business Travel Group (NYSE: GBTG) provides end-to-end business travel and expense management solutions, connecting corporate clients with travel suppliers and offering specialized software services.
Why Should You Sell GBTG?
- Sales trends were unexciting over the last two years as its 5.3% annual growth was well below the typical software company
- Gross margin of 61% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
American Express Global Business Travel’s stock price of $8.16 implies a valuation ratio of 1.2x forward price-to-sales. Check out our free in-depth research report to learn more about why GBTG doesn’t pass our bar.
Trex (TREX)
Trailing 12-Month GAAP Operating Margin: 22.9%
Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE: TREX) makes wood-alternative decking, railing, and patio furniture.
Why Do We Think TREX Will Underperform?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Free cash flow margin dropped by 6.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Trex is trading at $41.73 per share, or 24.5x forward P/E. If you’re considering TREX for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
