3 Profitable Stocks We're Skeptical 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Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here are three profitable companies that don’t make the cut and some better opportunities instead.

El Pollo Loco (LOCO)

Trailing 12-Month GAAP Operating Margin: 8.5%

With a name that translates into ‘The Crazy Chicken’, El Pollo Loco (NASDAQ:LOCO) is a fast food chain known for its citrus-marinated, fire-grilled chicken recipe that hails from the coastal town of Sinaloa, Mexico.

Why Is LOCO Risky?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Modest revenue base of $480.8 million gives it less fixed cost leverage and fewer distribution channels than larger companies
3. Projected sales growth of 3.7% for the next 12 months suggests sluggish demand

At $10.14 per share, El Pollo Loco trades at 10.8x forward P/E. Read our free research report to see why you should think twice about including LOCO in your portfolio.

XPO (XPO)

Trailing 12-Month GAAP Operating Margin: 8.2%

Owning a mobile game simulating freight operations for the Tour de France, XPO (NYSE:XPO) is a transportation company specializing in expedited shipping services.

Why Are We Out on XPO?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 1.4% annually over the last five years
2. Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 14.7%
3. 4.3 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

XPO is trading at $148.18 per share, or 37.8x forward P/E. Dive into our free research report to see why there are better opportunities than XPO.

Amentum (AMTM)

Trailing 12-Month GAAP Operating Margin: 3.4%

With operations spanning approximately 80 countries and a workforce of specialized engineers and technical experts, Amentum Holdings (NYSE:AMTM) provides advanced engineering and technology solutions to U.S. government agencies, allied governments, and commercial enterprises across defense, energy, and space sectors.

Why Does AMTM Give Us Pause?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 2.4% over the last three years was below our standards for the business services sector
2. Forecasted revenue decline of 1.4% for the upcoming 12 months implies demand will fall off a cliff
3. Low free cash flow margin of 2.3% for the last four years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Amentum’s stock price of $36.48 implies a valuation ratio of 15.4x forward P/E. If you’re considering AMTM for your portfolio, see our FREE research report to learn more.

Stocks We Like More

Check out the high-quality names we’ve flagged in 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 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.