3 Profitable Stocks Skating on Thin Ice

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

F5 (FFIV)

Trailing 12-Month GAAP Operating Margin: 24.4%

Initially started as a hardware appliances company in the late 1990s, F5 (NASDAQ:FFIV) makes software that helps large enterprises ensure their web applications are always available by distributing network traffic and protecting them from cyberattacks.

Why Does FFIV Fall Short?

1. 3.5% annual revenue growth over the last three years was slower than its software peers
2. Challenges in acquiring and retaining long-term customers were reflected in its average ARR declines of 8.3% over the last year
3. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.6%

At $288.59 per share, F5 trades at 5.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than FFIV.

Home Depot (HD)

Trailing 12-Month GAAP Operating Margin: 13.2%

Founded and headquartered in Atlanta, Georgia, Home Depot (NYSE:HD) is a home improvement retailer that sells everything from tools to building materials to appliances.

Why Is HD Not Exciting?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Estimated sales growth of 1.6% for the next 12 months implies demand will slow from its six-year trend
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 2.5 percentage points

Home Depot’s stock price of $347.99 implies a valuation ratio of 22.7x forward P/E. If you’re considering HD for your portfolio, see our FREE research report to learn more.

MGP Ingredients (MGPI)

Trailing 12-Month GAAP Operating Margin: 6.8%

Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQ:MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry

Why Do We Steer Clear of MGPI?

1. Products aren't resonating with the market as its revenue declined by 2.8% annually over the last three years
2. Forecasted revenue decline of 19.8% for the upcoming 12 months implies demand will fall even further
3. Operating margin declined by 10 percentage points over the last year as its sales cratered

MGP Ingredients is trading at $30.13 per share, or 11.2x forward P/E. Check out our free in-depth research report to learn more about why MGPI doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. 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 Kadant (+351% 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