Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here are three profitable companies to steer clear of and a few better alternatives.

Dillard's (DDS)

Trailing 12-Month GAAP Operating Margin: 11.2%

With stores located largely in the Southern and Western US, Dillard’s (NYSE:DDS) is a department store chain that sells clothing, cosmetics, accessories, and home goods.

Why Are We Wary of DDS?

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. Sales are projected to tank by 2.4% over the next 12 months as demand evaporates further
3. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.2 percentage points

Dillard’s stock price of $335.66 implies a valuation ratio of 11x forward price-to-earnings. To fully understand why you should be careful with DDS, check out our full research report (it’s free).

Carriage Services (CSV)

Trailing 12-Month GAAP Operating Margin: 20.7%

Established in 1991, Carriage Services (NYSE:CSV) is a provider of funeral and cemetery services in the United States.

Why Do We Think Twice About CSV?

1. Sales trends were unexciting over the last two years as its 4.5% annual growth was below the typical consumer discretionary company
2. Projected sales growth of 7.2% for the next 12 months suggests sluggish demand
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

Carriage Services is trading at $39.58 per share, or 12.8x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CSV.

Universal Technical Institute (UTI)

Trailing 12-Month GAAP Operating Margin: 9.5%

Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.

Why Do We Avoid UTI?

1. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.6 percentage points
2. Low returns on capital reflect management’s struggle to allocate funds effectively, and its falling returns suggest its earlier profit pools are drying up
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $29.15 per share, Universal Technical Institute trades at 25x forward price-to-earnings. If you’re considering UTI 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 6 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.