Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
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 avoid and some better opportunities instead.
Academy Sports (ASO)
Trailing 12-Month GAAP Operating Margin: 8.3%
Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ: ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.
Why Are We Wary of ASO?
- Annual revenue declines of 2.4% over the last three years indicate problems with its market positioning
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 3.9 percentage points
At $50.08 per share, Academy Sports trades at 8x forward P/E. Read our free research report to see why you should think twice about including ASO in your portfolio.
Keurig Dr Pepper (KDP)
Trailing 12-Month GAAP Operating Margin: 17%
Born out of a 2018 merger between Keurig Green Mountain and Dr Pepper Snapple, Keurig Dr Pepper (NASDAQ: KDP) is a consumer staples powerhouse boasting a portfolio of beverages including sodas, coffees, and juices.
Why Are We Cautious About KDP?
- Sizable revenue base leads to growth challenges as its 5.8% annual revenue increases over the last three years fell short of other consumer staples companies
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 5.9 percentage points
- Underwhelming 5.8% return on capital reflects management’s difficulties in finding profitable growth opportunities
Keurig Dr Pepper is trading at $28.17 per share, or 13.2x forward P/E. Dive into our free research report to see why there are better opportunities than KDP.
Astec (ASTE)
Trailing 12-Month GAAP Operating Margin: 8.2%
Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ: ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.
Why Do We Think Twice About ASTE?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 28.2% decline in its backlog
- High input costs result in an inferior gross margin of 23.9% that must be offset through higher volumes
- Negative free cash flow raises questions about the return timeline for its investments
Astec’s stock price of $45.20 implies a valuation ratio of 14.8x forward P/E. If you’re considering ASTE for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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 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 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-small-cap company Exlservice (+354% 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.
