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.
Wix (WIX)
Trailing 12-Month GAAP Operating Margin: 5.7%
Founded in 2006 in Tel Aviv, Wix.com (NASDAQ:WIX) offers a free and easy to operate website building platform.
Why Does WIX Give Us Pause?
- Sales trends were unexciting over the last three years as its 11.5% annual growth was below the typical software company
- Gross margin of 67.9% reflects its relatively high servicing costs
At $158.86 per share, Wix trades at 4.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than WIX.
Tapestry (TPR)
Trailing 12-Month GAAP Operating Margin: 17.5%
Originally founded as Coach, Tapestry (NYSE:TPR) is an American fashion conglomerate with a portfolio of luxury brands offering high-quality accessories and fashion products.
Why Does TPR Worry Us?
- Sales trends were unexciting over the last two years as its 1.4% annual growth was below the typical consumer discretionary company
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Estimated sales growth of 2.8% for the next 12 months is soft and implies weaker demand
Tapestry’s stock price of $66.58 implies a valuation ratio of 13.4x forward price-to-earnings. To fully understand why you should be careful with TPR, check out our full research report (it’s free).
Elanco (ELAN)
Trailing 12-Month GAAP Operating Margin: 2.3%
Originally established as a division of pharmaceutical giant Eli Lilly before becoming independent in 2018, Elanco Animal Health (NYSE:ELAN) develops and sells medications, vaccines, and other health products for pets and farm animals across more than 90 countries.
Why Are We Cautious About ELAN?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Issuance of new shares over the last five years caused its earnings per share to fall by 3.1% annually while its revenue grew
- Negative returns on capital show management lost money while trying to expand the business
Elanco is trading at $9.61 per share, or 10.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why ELAN doesn’t pass our bar.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.