Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
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 avoid and some better opportunities instead.
Tractor Supply (TSCO)
Trailing 12-Month GAAP Operating Margin: 9.7%
Started as a mail-order tractor parts business, Tractor Supply (NASDAQ: TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.
Why Does TSCO Worry Us?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.4% over the last three years was below our standards for the consumer retail sector
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 36.4%
At $52.38 per share, Tractor Supply trades at 23.6x forward P/E. Read our free research report to see why you should think twice about including TSCO in your portfolio.
Integral Ad Science (IAS)
Trailing 12-Month GAAP Operating Margin: 11.1%
Processing over 280 billion digital ad interactions daily through its AI-powered technology, Integral Ad Science (NASDAQ: IAS) provides a cloud-based platform that measures and verifies digital advertising across devices, channels, and formats to ensure ads are viewable, fraud-free, and brand-safe.
Why Does IAS Give Us Pause?
- 13.6% annual revenue growth over the last two years was slower than its software peers
- Operating margin expanded by 1 percentage points over the last year as it scaled and became more efficient
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 10.9 percentage points over the next year
Integral Ad Science is trading at $10.26 per share, or 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why IAS doesn’t pass our bar.
Avnet (AVT)
Trailing 12-Month GAAP Operating Margin: 2.8%
With a century-long history of adapting to technological evolution, Avnet (NASDAQ: AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.
Why Are We Cautious About AVT?
- Sales tumbled by 7.2% annually over the last two years, showing market trends are working against its favor during this cycle
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Avnet’s stock price of $48.59 implies a valuation ratio of 9.9x forward P/E. If you’re considering AVT for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
