3 Profitable Stocks in Dangerous Territory

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.

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here are three profitable companies to steer clear of and a few better alternatives.

Kulicke and Soffa (KLIC)

Trailing 12-Month GAAP Operating Margin: 1.9%

Headquartered in Singapore, Kulicke & Soffa (NASDAQ: KLIC) is a provider of production equipment and tools used to assemble semiconductor devices

Why Are We Out on KLIC?

1. Sales tumbled by 17.2% annually over the last two years, showing market trends are working against its favor during this cycle
2. Forecasted revenue decline of 8.8% for the upcoming 12 months implies demand will fall even further
3. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 16.4 percentage points

Kulicke and Soffa is trading at $36.26 per share, or 21.4x forward P/E. Read our free research report to see why you should think twice about including KLIC in your portfolio.

G-III (GIII)

Trailing 12-Month GAAP Operating Margin: 9.1%

Founded as a small leather goods business, G-III (NASDAQ:GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.

Why Do We Steer Clear of GIII?

1. Sales stagnated over the last two years and signal the need for new growth strategies
2. Projected sales decline of 1.3% for the next 12 months points to an even tougher demand environment ahead
3. ROIC of 8.3% reflects management’s challenges in identifying attractive investment opportunities

At $23.94 per share, G-III trades at 6.3x forward P/E. To fully understand why you should be careful with GIII, check out our full research report (it’s free).

Verizon (VZ)

Trailing 12-Month GAAP Operating Margin: 21.5%

Formed in 1984 as Bell Atlantic after the breakup of Bell System into seven companies, Verizon (NYSE:VZ) is a telecom giant providing a range of communications and internet services.

Why Do We Pass on VZ?

1. Customer growth was choppy over the past two years, suggesting that increasing competition is causing challenges in landing new contracts
2. Projected 2.2 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Verizon’s stock price of $41.69 implies a valuation ratio of 8.8x forward P/E. Check out our free in-depth research report to learn more about why VZ doesn’t pass our bar.

Stocks We Like More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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

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