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 that don’t make the cut and some better opportunities instead.
Five Below (FIVE)
Trailing 12-Month GAAP Operating Margin: 8.9%
Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ: FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Why Does FIVE Worry Us?
- Subscale operations are evident in its revenue base of $4.43 billion, meaning it has fewer distribution channels than its larger rivals
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 35.4%
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
At $191.82 per share, Five Below trades at 30.1x forward P/E. Dive into our free research report to see why there are better opportunities than FIVE.
Brookdale (BKD)
Trailing 12-Month GAAP Operating Margin: 1.7%
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 Think Twice About BKD?
- Sales tumbled by 2.6% annually over the last five years, showing market trends are working against its favor during this cycle
- Forecasted revenue decline of 6.1% for the upcoming 12 months implies demand will fall off a cliff
- High net-debt-to-EBITDA ratio of 12× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Brookdale is trading at $12.89 per share, or 17.3x forward EV-to-EBITDA. If you’re considering BKD for your portfolio, see our FREE research report to learn more.
Bread Financial (BFH)
Trailing 12-Month GAAP Operating Margin: 14.2%
Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE: BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.
Why Do We Think BFH Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.1% annually over the last two years
- Earnings per share have dipped by 3% annually over the past two years, which is concerning because stock prices follow EPS over the long term
Bread Financial’s stock price of $70.27 implies a valuation ratio of 7.8x forward P/E. To fully understand why you should be careful with BFH, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
Check out the high-quality names we’ve flagged in 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 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.
