3 Profitable Stocks with Warning Signs

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".

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.

onsemi (ON)

Trailing 12-Month GAAP Operating Margin: 1.4%

Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ:ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.

Why Does ON Worry Us?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 14.8% annually over the last two years
2. Anticipated sales growth of 4.9% for the next year implies demand will be shaky
3. Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 17.7 percentage points

onsemi is trading at $68.05 per share, or 23.9x forward P/E. Read our free research report to see why you should think twice about including ON in your portfolio.

Ingersoll Rand (IR)

Trailing 12-Month GAAP Operating Margin: 15%

Started with the invention of the steam drill, Ingersoll Rand (NYSE:IR) provides mission-critical air, gas, liquid, and solid flow creation solutions.

Why Does IR Fall Short?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.1%
3. Underwhelming 5.9% return on capital reflects management’s difficulties in finding profitable growth opportunities

Ingersoll Rand’s stock price of $94.54 implies a valuation ratio of 26.3x forward P/E. Check out our free in-depth research report to learn more about why IR doesn’t pass our bar.

UniFirst (UNF)

Trailing 12-Month GAAP Operating Margin: 7.1%

With a fleet of trucks making weekly deliveries to over 300,000 customer locations, UniFirst (NYSE:UNF) provides, rents, cleans, and maintains workplace uniforms and protective clothing for businesses across various industries.

Why Are We Cautious About UNF?

1. Annual revenue growth of 3.5% over the last two years was below our standards for the business services sector
2. Anticipated sales growth of 2.5% for the next year implies demand will be shaky
3. Earnings per share lagged its peers over the last five years as they only grew by 2.1% annually

At $232.45 per share, UniFirst trades at 32x forward P/E. Read our free research report to see why you should think twice about including UNF in your portfolio.

Stocks We Like More

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.