3 Profitable Stocks We Steer Clear Of

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. That said, here are three profitable companies to steer clear of and a few better alternatives.

G-III (GIII)

Trailing 12-Month GAAP Operating Margin: 8.4%

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

Why Should You Sell GIII?

1. Products and services have few die-hard fans as sales have declined by 1.2% annually over the last two years
2. Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

G-III is trading at $25.86 per share, or 10.3x forward P/E. To fully understand why you should be careful with GIII, check out our full research report (it’s free).

TopBuild (BLD)

Trailing 12-Month GAAP Operating Margin: 16.5%

Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.

Why Does BLD Fall Short?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Anticipated sales growth of 3.1% for the next year implies demand will be shaky
3. Earnings per share lagged its peers over the last two years as they only grew by 5% annually

TopBuild’s stock price of $435.65 implies a valuation ratio of 20.9x forward P/E. If you’re considering BLD for your portfolio, see our FREE research report to learn more.

ScanSource (SCSC)

Trailing 12-Month GAAP Operating Margin: 3.1%

Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ:SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.

Why Are We Out on SCSC?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 11.4% annually over the last two years
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. ROIC of 8.1% reflects management’s challenges in identifying attractive investment opportunities

At $45.81 per share, ScanSource trades at 11.9x forward P/E. Dive into our free research report to see why there are better opportunities than SCSC.

Stocks We Like More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out 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 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 Tecnoglass (+1,754% 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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