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 that don’t make the cut and some better opportunities instead.
Ralph Lauren (RL)
Trailing 12-Month GAAP Operating Margin: 14.6%
Originally founded as a necktie company, Ralph Lauren (NYSE: RL) is an iconic American fashion brand known for its classic and sophisticated style.
Why Should You Sell RL?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Subpar operating margin of 13.7% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Ralph Lauren is trading at $376.83 per share, or 21.6x forward P/E. To fully understand why you should be careful with RL, check out our full research report (it’s free).
Tri Pointe Homes (TPH)
Trailing 12-Month GAAP Operating Margin: 11.1%
Established in 2009 in California, Tri Pointe Homes (NYSE: TPH) is a United States homebuilder recognized for its innovative and sustainable approach to creating premium, life-enhancing homes.
Why Is TPH Risky?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 38.5% decline in its backlog
- Projected sales decline of 17.8% over the next 12 months indicates demand will continue deteriorating
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 7.5% annually, worse than its revenue
At $46.31 per share, Tri Pointe Homes trades at 21.5x forward P/E. Read our free research report to see why you should think twice about including TPH in your portfolio.
Envista (NVST)
Trailing 12-Month GAAP Operating Margin: 7.9%
Uniting more than 30 trusted brands including Nobel Biocare, Ormco, and DEXIS under one corporate umbrella, Envista Holdings (NYSE: NVST) is a global dental products company that provides equipment, consumables, and specialized technologies for dental professionals.
Why Do We Steer Clear of NVST?
- Muted 2.9% annual revenue growth over the last two years shows its demand lagged behind its healthcare peers
- Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Envista’s stock price of $28.75 implies a valuation ratio of 20.2x forward P/E. Dive into our free research report to see why there are better opportunities than NVST.
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 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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
