Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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. Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here are three profitable companies to avoid and some better opportunities instead.\n\nDarden (DRI)\nTrailing 12-Month GAAP Operating Margin: 11.3%\nFounded in 1968 as Red Lobster, Darden is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.\n\nWhy Do We Think Twice About DRI?\nLarge revenue base makes it harder to increase sales quickly, and its annual revenue growth of 6% over the last six years was below our standards for the restaurant sector. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants. Gross margin of 21.5% reflects the bad unit economics inherent in most restaurant businesses.\nAt $202.44 per share, Darden trades at 19.2x forward P/E.\n\nSimpson (SSD)\nTrailing 12-Month GAAP Operating Margin: 19.6%\nAiming to build safer and stronger buildings, Simpson designs and manufactures structural connectors, anchors, and other construction products.\n\nWhy Does SSD Worry Us?\nMuted 2.6% annual revenue growth over the last two years shows its demand lagged behind its industrials peers. Free cash flow margin shrank by 10.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive. Waning returns on capital imply its previous profit engines are losing steam.\nSimpson’s stock price of $181.36 implies a valuation ratio of 21.5x forward P/E.\n\nThermo Fisher (TMO)\nTrailing 12-Month GAAP Operating Margin: 17.1%\nWith over 14,000 sales personnel and a portfolio spanning more than 2,500 technology manufacturers, Thermo Fisher Scientific provides scientific equipment, reagents, consumables, software, and laboratory services to pharmaceutical, biotech, academic, and healthcare customers worldwide.\n\nWhy Is TMO Not Exciting?\nCore business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth. Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 10.2 percentage points. Waning returns on capital imply its previous profit engines are losing steam.\nThermo Fisher is trading at $460.80 per share, or 19.5x forward P/E.\n\nHigh-Quality Stocks for All Market Conditions\nTrump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines. Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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).

3 Profitable Stocks We Find Risky

The article identifies three profitable but potentially risky companies—Darden (DRI), Simpson (SSD), and Thermo Fisher (TMO)—that may not have sustainable business models due to weak growth, poor same-store sales, declining margins, and waning returns on capital. The authors caution investors against these stocks despite their profitability, emphasizing that profits do not guarantee long-term success. Instead, they recommend high-quality alternatives, including Nvidia and Comfort Systems, which have delivered strong five-year returns. The piece is framed as investment advice from StockStory, highlighting companies with real staying power.