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 that don’t make the cut and some better opportunities instead.
Adobe (ADBE)
Trailing 12-Month GAAP Operating Margin: 36.6%
Originally named after Adobe Creek that ran behind co-founder John Warnock's house, Adobe (NASDAQ:ADBE) develops software products used for digital content creation, document management, and marketing solutions across desktop, mobile, and cloud platforms.
Why Is ADBE Not Exciting?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 12.6% underwhelmed
- Anticipated sales growth of 9.5% for the next year implies demand will be shaky
- Operating margin expanded by 5.3 percentage points over the last year as it scaled and became more efficient
Adobe’s stock price of $339.61 implies a valuation ratio of 5.4x forward price-to-sales. To fully understand why you should be careful with ADBE, check out our full research report (it’s free).
WeightWatchers (WW)
Trailing 12-Month GAAP Operating Margin: 9.6%
Known by many for its old cable television commercials, WeightWatchers (NASDAQ:WW) is a wellness company offering a range of products and services promoting weight loss and healthy habits.
Why Do We Steer Clear of WW?
- Performance surrounding its members has lagged its peers
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $34.06 per share, WeightWatchers trades at 21.2x forward P/E. If you’re considering WW for your portfolio, see our FREE research report to learn more.
Affiliated Managers Group (AMG)
Trailing 12-Month GAAP Operating Margin: 24.9%
Using a partnership approach that preserves entrepreneurial culture at its portfolio companies, Affiliated Managers Group (NYSE:AMG) is an investment firm that acquires stakes in boutique asset management companies while allowing them to maintain operational independence.
Why Are We Hesitant About AMG?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.3% annually over the last two years
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 7.8% annually
Affiliated Managers Group is trading at $307.05 per share, or 10.5x forward P/E. Check out our free in-depth research report to learn more about why AMG doesn’t pass our bar.
Stocks We Like More
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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.