3 Profitable Stocks We're Skeptical Of

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. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.

Under Armour (UAA)

Trailing 12-Month GAAP Operating Margin: 2.3%

Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE:UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.

Why Is UAA Risky?

1. Constant currency revenue growth has disappointed over the past two years and shows demand was soft
2. Forecasted revenue decline of 2.8% for the upcoming 12 months implies demand will fall even further
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $4.84 per share, Under Armour trades at 83.1x forward P/E. Read our free research report to see why you should think twice about including UAA in your portfolio.

Norfolk Southern (NSC)

Trailing 12-Month GAAP Operating Margin: 41.5%

Starting with a single route from Virginia to North Carolina, Norfolk Southern (NYSE:NSC) is a freight transportation company operating a major railroad network across the eastern United States.

Why Do We Think NSC Will Underperform?

1. Underwhelming unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
2. Estimated sales growth of 2.8% for the next 12 months is soft and implies weaker demand
3. Earnings per share have dipped by 4.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term

Norfolk Southern is trading at $292.40 per share, or 22.3x forward P/E. Dive into our free research report to see why there are better opportunities than NSC.

Encompass Health (EHC)

Trailing 12-Month GAAP Operating Margin: 17.3%

With a network of 161 specialized facilities across 37 states and Puerto Rico, Encompass Health (NYSE:EHC) operates inpatient rehabilitation hospitals that help patients recover from strokes, hip fractures, and other debilitating conditions.

Why Are We Cautious About EHC?

1. 4.3% annual revenue growth over the last five years was slower than its healthcare peers
2. Free cash flow margin dropped by 1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Encompass Health’s stock price of $121.31 implies a valuation ratio of 22.1x forward P/E. If you’re considering EHC for your portfolio, see our FREE research report to learn more.

Stocks We Like More

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.