Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 avoid and some better opportunities instead.
Revolve (RVLV)
Trailing 12-Month GAAP Operating Margin: 5.4%
Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve (NASDAQ:RVLV) is a fashion retailer leveraging social media and a community of fashion influencers to drive its merchandising strategy.
Why Do We Steer Clear of RVLV?
- White space opportunities may be dwindling as its growth in active customers averaged a weak 5.7%
- Monetization and engagement metrics haven’t budged over the last two years, suggesting it may need to increase the efficacy of its platform
- Earnings per share have dipped by 10.5% annually over the past three years, which is concerning because stock prices follow EPS over the long term
Revolve’s stock price of $28.70 implies a valuation ratio of 21.1x forward EV/EBITDA. Read our free research report to see why you should think twice about including RVLV in your portfolio.
Sirius XM (SIRI)
Trailing 12-Month GAAP Operating Margin: 20.5%
Known for its commercial-free music channels, Sirius XM (NASDAQ:SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.
Why Should You Sell SIRI?
- Number of core subscribers has disappointed over the past two years, indicating weak demand for its offerings
- Poor free cash flow margin of 12.3% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $20.15 per share, Sirius XM trades at 6.7x forward P/E. To fully understand why you should be careful with SIRI, check out our full research report (it’s free).
H&R Block (HRB)
Trailing 12-Month GAAP Operating Margin: 22.5%
Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block (NYSE:HRB) is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.
Why Do We Pass on HRB?
- Lackluster 5.3% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 16.7% for the last two years
- Stagnant returns on capital show management has failed to improve the company’s business quality
H&R Block is trading at $40.30 per share, or 8.6x forward P/E. Check out our free in-depth research report to learn more about why HRB doesn’t pass our bar.
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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.