3 Profitable Stocks with Questionable Fundamentals

Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 steer clear of and a few better alternatives.

Spectrum Brands (SPB)

Trailing 12-Month GAAP Operating Margin: 4.6%

A leader in multiple consumer product categories, Spectrum Brands (NYSE:SPB) is a diversified company with a portfolio of trusted brands spanning home appliances, garden care, personal care, and pet care.

Why Do We Steer Clear of SPB?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
3. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

At $55.03 per share, Spectrum Brands trades at 10.4x forward P/E. Dive into our free research report to see why there are better opportunities than SPB.

Meritage Homes (MTH)

Trailing 12-Month GAAP Operating Margin: 14.1%

Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE:MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.

Why Should You Dump MTH?

1. Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 38.2% declines over the past two years
2. 15.7 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Meritage Homes is trading at $70.39 per share, or 7.9x forward P/E. Read our free research report to see why you should think twice about including MTH in your portfolio.

Assurant (AIZ)

Trailing 12-Month GAAP Operating Margin: 6.8%

With roots dating back to 1892 when it was founded by a Civil War veteran, Assurant (NYSE:AIZ) provides specialized insurance products and services that protect major consumer purchases like mobile devices, vehicles, homes, and appliances.

Why Does AIZ Fall Short?

1. Annual sales growth of 3.6% over the last five years lagged behind its insurance peers as its large revenue base made it difficult to generate incremental demand
2. Annual net premiums earned growth of 4.7% over the last four years lagged behind its insurance peers as its large revenue base made it difficult to generate incremental business
3. Annual book value per share growth of 2.8% over the last five years lagged behind its insurance peers as its large balance sheet made it difficult to generate incremental capital growth

Assurant’s stock price of $185.74 implies a valuation ratio of 1.7x forward P/B. If you’re considering AIZ for your portfolio, see our FREE research report to learn more.

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-micro-cap company Kadant (+351% 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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