3 Profitable Stocks We Think Twice About

Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.

Estée Lauder (EL)

Trailing 12-Month GAAP Operating Margin: 2.9%

Named after its founder, who was an entrepreneurial woman from New York with a passion for skincare, Estée Lauder (NYSE:EL) is a one-stop beauty shop with products in skincare, fragrance, makeup, sun protection, and men’s grooming.

Why Are We Wary of EL?

1. 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
2. Subpar operating margin of -0.7% constrains its ability to invest in process improvements or effectively respond to new competitive threats
3. Issuance of new shares over the last three years caused its earnings per share to fall by 16.5% annually, even worse than its revenue declines

Estée Lauder is trading at $82.28 per share, or 27.2x forward P/E. Check out our free in-depth research report to learn more about why EL doesn’t pass our bar.

DaVita (DVA)

Trailing 12-Month GAAP Operating Margin: 15.1%

With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE:DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.

Why Does DVA Give Us Pause?

1. Flat treatments over the past two years imply it may need to invest in improvements to get back on track
2. Estimated sales growth of 2.6% for the next 12 months implies demand will slow from its two-year trend
3. 1.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

DaVita’s stock price of $231.88 implies a valuation ratio of 15.1x forward P/E. Read our free research report to see why you should think twice about including DVA in your portfolio.

Excelerate Energy (EE)

Trailing 12-Month GAAP Operating Margin: 21%

Operating specialized vessels that can deliver up to 1.2 billion cubic feet of natural gas per day, Excelerate Energy (NYSE:EE) provides liquified natural gas regasification services using floating vessels that convert LNG back into natural gas.

Why Are We Hesitant About EE?

1. Smaller revenue base of $1.35 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
2. Costly operations and weak unit economics result in an inferior gross margin of 29.5% that must be offset through higher production volumes

At $39.43 per share, Excelerate Energy trades at 23.9x forward P/E. Dive into our free research report to see why there are better opportunities than EE.

High-Quality Stocks for All Market Conditions

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.