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".

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.

Littelfuse (LFUS)

Trailing 12-Month GAAP Operating Margin: 8.5%

The developer of the first blade-type automotive fuse, Littelfuse (NASDAQ:LFUS) provides electrical protection and control components for the automotive, industrial, electronics, and telecommunications industries.

Why Do We Pass on LFUS?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 6% annually over the last two years
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Littelfuse’s stock price of $237.35 implies a valuation ratio of 24.4x forward P/E. If you’re considering LFUS for your portfolio, see our FREE research report to learn more.

AbbVie (ABBV)

Trailing 12-Month GAAP Operating Margin: 17.6%

Born from a 2013 spinoff of Abbott Laboratories' pharmaceutical business, AbbVie (NYSE:ABBV) is a biopharmaceutical company that develops and markets medications for autoimmune diseases, cancer, neurological disorders, and other complex health conditions.

Why Is ABBV Not Exciting?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share
2. Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 9.2 percentage points
3. 8.6 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

At $190.74 per share, AbbVie trades at 15x forward P/E. Dive into our free research report to see why there are better opportunities than ABBV.

NetApp (NTAP)

Trailing 12-Month GAAP Operating Margin: 20.3%

Founded in 1992 as a pioneer in networked storage technology, NetApp (NASDAQ:NTAP) provides data storage and management solutions that help organizations store, protect, and optimize their data across on-premises data centers and public clouds.

Why Are We Hesitant About NTAP?

1. Sales trends were unexciting over the last two years as its 1.6% annual growth was below the typical business services company
2. Average billings growth of 3% over the past two years was subpar, suggesting it struggled to push its products and might have to lower prices to stimulate demand
3. Estimated sales growth of 2.7% for the next 12 months is soft and implies weaker demand

NetApp is trading at $106.90 per share, or 14x forward P/E. Read our free research report to see why you should think twice about including NTAP in your portfolio.

Stocks We Like More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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