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.
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 that don’t make the cut and some better opportunities instead.
Alarm.com (ALRM)
Trailing 12-Month GAAP Operating Margin: 13.1%
Processing over 325 billion data points annually from more than 150 million connected devices, Alarm.com (NASDAQ: ALRM) provides cloud-based platforms that enable residential and commercial property owners to remotely monitor and control their security, video, energy, and other connected devices.
Why Should You Dump ALRM?
- Average billings growth of 7% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 3.8% for the next 12 months implies demand will slow from its two-year trend
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
Alarm.com is trading at $50.03 per share, or 2.7x forward price-to-sales. If you’re considering ALRM for your portfolio, see our FREE research report to learn more.
RH (RH)
Trailing 12-Month GAAP Operating Margin: 10.7%
Formerly known as Restoration Hardware, RH (NYSE: RH) is a specialty retailer that exclusively sells its own brand of high-end furniture and home decor.
Why Do We Think Twice About RH?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $153.54 per share, RH trades at 13.3x forward P/E. Read our free research report to see why you should think twice about including RH in your portfolio.
Acadia Healthcare (ACHC)
Trailing 12-Month GAAP Operating Margin: 8.3%
With a network of over 250 facilities serving patients in 38 states and Puerto Rico, Acadia Healthcare (NASDAQ: ACHC) operates facilities providing mental health and substance use disorder treatment services across the United States.
Why Are We Hesitant About ACHC?
- Weak admissions over the past two years indicate demand is soft and that the company may need to revise its strategy
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 5.2 percentage points
- Free cash flow margin dropped by 21.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Acadia Healthcare’s stock price of $15.25 implies a valuation ratio of 6.6x forward P/E. Check out our free in-depth research report to learn more about why ACHC doesn’t pass our bar.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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
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