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.

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are three profitable companies that don’t make the cut and some better opportunities instead.

Kontoor Brands (KTB)

Trailing 12-Month GAAP Operating Margin: 12.7%

Founded in 2019 after separating from VF Corporation, Kontoor Brands (NYSE: KTB) is a clothing company known for its high-quality denim products.

Why Do We Think Twice About KTB?

1. Flat sales over the last two years suggest it must innovate and find new ways to grow
2. Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
3. Earnings per share lagged its peers over the last five years as they only grew by 9.4% annually

Kontoor Brands’s stock price of $62.85 implies a valuation ratio of 12.8x forward P/E. Check out our free in-depth research report to learn more about why KTB doesn’t pass our bar.

Oxford Industries (OXM)

Trailing 12-Month GAAP Operating Margin: 6.8%

The parent company of Tommy Bahama, Oxford Industries (NYSE: OXM) is a lifestyle fashion conglomerate with brands that embody outdoor happiness.

Why Do We Steer Clear of OXM?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Waning returns on capital imply its previous profit engines are losing steam

At $42.71 per share, Oxford Industries trades at 9.4x forward P/E. If you’re considering OXM for your portfolio, see our FREE research report to learn more.

Travel + Leisure (TNL)

Trailing 12-Month GAAP Operating Margin: 19.3%

Formerly known as Wyndham Destinations, Travel + Leisure (NYSE: TNL) is a global vacation company that provides travelers with vacation ownership, exchange, and travel services.

Why Does TNL Worry Us?

1. Number of tours conducted has disappointed over the past two years, indicating weak demand for its offerings
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. High net-debt-to-EBITDA ratio of 8× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Travel + Leisure is trading at $63.18 per share, or 9.4x forward P/E. To fully understand why you should be careful with TNL, check out our full research report (it’s free).

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