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.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here are three profitable companies to steer clear of and a few better alternatives.
Guess (GES)
Trailing 12-Month GAAP Operating Margin: 3.5%
Flexing the iconic upside-down triangle logo with a question mark, Guess (NYSE:GES) is a global fashion brand known for its trendy clothing, accessories, and denim wear.
Why Do We Think GES Will Underperform?
- Muted 8.7% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Guess is trading at $17.10 per share, or 10.9x forward P/E. Read our free research report to see why you should think twice about including GES in your portfolio.
Ingersoll Rand (IR)
Trailing 12-Month GAAP Operating Margin: 15.2%
Started with the invention of the steam drill, Ingersoll Rand (NYSE:IR) provides mission-critical air, gas, liquid, and solid flow creation solutions.
Why Does IR Fall Short?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Estimated sales growth of 5.6% for the next 12 months is soft and implies weaker demand
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $78.45 per share, Ingersoll Rand trades at 22.7x forward P/E. To fully understand why you should be careful with IR, check out our full research report (it’s free for active Edge members).
Tennant (TNC)
Trailing 12-Month GAAP Operating Margin: 7.3%
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE:TNC) designs, manufactures, and sells cleaning products to various sectors.
Why Do We Pass on TNC?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.7%
- Sales over the last two years were less profitable as its earnings per share fell by 4.3% annually while its revenue was flat
Tennant’s stock price of $72.42 implies a valuation ratio of 11.1x forward P/E. Dive into our free research report to see why there are better opportunities than TNC.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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