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".

Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here are three profitable companies to steer clear of and a few better alternatives.

Jack in the Box (JACK)

Trailing 12-Month GAAP Operating Margin: 5%

Delighting customers since its inception in 1951, Jack in the Box (NASDAQ:JACK) is a distinctive fast-food chain known for its bold flavors, innovative menu items, and quirky marketing.

Why Are We Wary of JACK?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 10.6 percentage points
3. 10× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Jack in the Box’s stock price of $26.11 implies a valuation ratio of 4.8x forward P/E. Dive into our free research report to see why there are better opportunities than JACK.

Acushnet (GOLF)

Trailing 12-Month GAAP Operating Margin: 12.4%

Producer of the acclaimed Titleist Pro V1 golf ball, Acushnet (NYSE:GOLF) is a design and manufacturing company specializing in performance-driven golf products.

Why Does GOLF Give Us Pause?

1. Sales trends were unexciting over the last two years as its 4% annual growth was below the typical consumer discretionary company
2. Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its two-year trend
3. Low free cash flow margin of 9.6% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

At $65.81 per share, Acushnet trades at 17.5x forward P/E. To fully understand why you should be careful with GOLF, check out our full research report (it’s free).

Mueller Water Products (MWA)

Trailing 12-Month GAAP Operating Margin: 15.1%

As one of the oldest companies in the water infrastructure industry, Mueller (NYSE:MWA) is a provider of water infrastructure products and flow control systems for various sectors.

Why Are We Cautious About MWA?

1. Sales trends were unexciting over the last two years as its 2.8% annual growth was below the typical industrials company
2. 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
3. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.8%

Mueller Water Products is trading at $27.06 per share, or 22.4x forward P/E. If you’re considering MWA for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.