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".
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here are three profitable companies to avoid and some better opportunities instead.
Bath and Body Works (BBWI)
Trailing 12-Month GAAP Operating Margin: 16.4%
Spun off from L Brands in 2020, Bath & Body Works (NYSE:BBWI) is a personal care and home fragrance retailer where consumers can find specialty shower gels, scented candles for the home, and lotions.
Why Does BBWI Fall Short?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Projected sales decline of 5.3% over the next 12 months indicates demand will continue deteriorating
- Earnings per share have contracted by 5.3% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Bath and Body Works is trading at $23 per share, or 9.1x forward P/E. If you’re considering BBWI for your portfolio, see our FREE research report to learn more.
Gartner (IT)
Trailing 12-Month GAAP Operating Margin: 15.6%
With over 2,500 research experts guiding organizations through complex technology landscapes, Gartner (NYSE:IT) provides research, advisory services, and conferences that help executives make better decisions about technology and other business priorities.
Why Do We Think Twice About IT?
- Estimated sales growth of 2.7% for the next 12 months implies demand will slow from its two-year trend
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 4.4 percentage points
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 9.3 percentage points
At $230.68 per share, Gartner trades at 17.5x forward P/E. Check out our free in-depth research report to learn more about why IT doesn’t pass our bar.
Kemper (KMPR)
Trailing 12-Month GAAP Operating Margin: 6.1%
Originally known as Unitrin until rebranding in 2011, Kemper (NYSE:KMPR) is an insurance holding company that provides automobile, homeowners, life, and other insurance products to individuals and businesses across the United States.
Why Do We Steer Clear of KMPR?
- Insurance offerings faced market headwinds this cycle, reflected in stagnant net premiums earned over the last five years
- Earnings per share fell by 4.7% annually over the last five years while its revenue was flat, showing each sale was less profitable
- Annual book value per share declines of 7.3% for the past five years show its capital management struggled during this cycle
Kemper’s stock price of $38.49 implies a valuation ratio of 0.8x forward P/B. Dive into our free research report to see why there are better opportunities than KMPR.
Stocks We Like More
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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.