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. Keeping that in mind, here are three profitable companies to avoid and some better opportunities instead.
onsemi (ON)
Trailing 12-Month GAAP Operating Margin: 10%
Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ: ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.
Why Does ON Fall Short?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 10.6% annually over the last two years
- Sales are projected to tank by 10.2% over the next 12 months as its demand continues evaporating
- Low free cash flow margin of 13.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $51.90 per share, onsemi trades at 18.9x forward P/E. If you’re considering ON for your portfolio, see our FREE research report to learn more.
The ONE Group (STKS)
Trailing 12-Month GAAP Operating Margin: 6.1%
Doubling as a hospitality services provider for hotels and resorts, The One Group Hospitality (NASDAQ: STKS) is an upscale restaurant company that operates STK Steakhouse and Kona Grill.
Why Should You Sell STKS?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
The ONE Group’s stock price of $3.49 implies a valuation ratio of 1.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why STKS doesn’t pass our bar.
Old Dominion Freight Line (ODFL)
Trailing 12-Month GAAP Operating Margin: 26.1%
With its name deriving from the Commonwealth of Virginia’s nickname, Old Dominion (NASDAQ: ODFL) delivers less-than-truckload (LTL) and full-container load freight.
Why Are We Cautious About ODFL?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Earnings per share have contracted by 6.4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Free cash flow margin dropped by 4.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Old Dominion Freight Line is trading at $161.98 per share, or 28.7x forward P/E. Dive into our free research report to see why there are better opportunities than ODFL.
High-Quality Stocks for All Market Conditions
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 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-small-cap company Comfort Systems (+782% 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.
