3 Profitable Stocks Skating on Thin Ice

A company with profits isn’t always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here are three profitable companies to steer clear of and a few better alternatives.

Target (TGT)

Trailing 12-Month GAAP Operating Margin: 4.9%

With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE:TGT) serves the suburban consumer who is looking for a wide range of products under one roof.

Why Are We Cautious About TGT?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Gross margin of 28% is below its competitors, leaving less money for marketing and promotions

Target is trading at $95.69 per share, or 11.2x forward P/E. Dive into our free research report to see why there are better opportunities than TGT.

Casella Waste Systems (CWST)

Trailing 12-Month GAAP Operating Margin: 4.2%

Starting with the founder picking up garbage with a pickup truck he purchased using savings from high school, Casella (NASDAQ:CWST) offers waste management services for businesses, residents, and the government.

Why Do We Think Twice About CWST?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Efficiency has decreased over the last five years as its operating margin fell by 4 percentage points
3. Earnings per share were flat while its revenue grew over the last two years, partly because it issued new shares

At $115.99 per share, Casella Waste Systems trades at 96.2x forward P/E. Read our free research report to see why you should think twice about including CWST in your portfolio.

Brookdale (BKD)

Trailing 12-Month GAAP Operating Margin: 2.1%

With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE:BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.

Why Do We Avoid BKD?

1. Sales tumbled by 4.8% annually over the last five years, showing market trends are working against its favor during this cycle
2. Below-average returns on capital indicate management struggled to find compelling investment opportunities
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Brookdale’s stock price of $6.82 implies a valuation ratio of 3.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BKD doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking 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