3 Profitable Stocks We Steer Clear Of

Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.

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.

Etsy (ETSY)

Trailing 12-Month GAAP Operating Margin: 10.4%

Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NASDAQ:ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.

Why Are We Hesitant About ETSY?

1. Active Buyers have stagnated over the last two years, indicating its platform may be struggling to differentiate itself from competitors
2. Sales are projected to remain flat over the next 12 months as demand decelerates from its three-year trend
3. Incremental sales over the last three years were less profitable as its earnings per share were flat while its revenue grew

At $70.12 per share, Etsy trades at 11.6x forward EV/EBITDA. If you’re considering ETSY for your portfolio, see our FREE research report to learn more.

Terex (TEX)

Trailing 12-Month GAAP Operating Margin: 7.2%

With humble beginnings as a dump truck company, Terex (NYSE:TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.

Why Does TEX Worry Us?

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. Incremental sales over the last two years were much less profitable as its earnings per share fell by 16.3% annually while its revenue grew
3. Free cash flow margin shrank by 5.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Terex is trading at $52.57 per share, or 9.8x forward P/E. Read our free research report to see why you should think twice about including TEX in your portfolio.

Veritex Holdings (VBTX)

Trailing 12-Month GAAP Operating Margin: 34%

Founded during the 2009 financial crisis when many banks were failing, Veritex Holdings (NASDAQGM:VBTX) operates Veritex Community Bank, providing commercial and retail banking services to small and medium-sized businesses and professionals in Texas.

Why Is VBTX Not Exciting?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.9% annually over the last two years
2. Estimated net interest income growth of 1.3% for the next 12 months implies demand will slow from its five-year trend
3. Sales were less profitable over the last two years as its earnings per share fell by 13.3% annually, worse than its revenue declines

Veritex Holdings’s stock price of $31.04 implies a valuation ratio of 1x forward P/B. Dive into our free research report to see why there are better opportunities than VBTX.

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 6 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-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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