3 Profitable Stocks with Mounting Challenges

A company with profits isn’t always 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.

NXP Semiconductors (NXPI)

Trailing 12-Month GAAP Operating Margin: 26.6%

Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.

Why Are We Hesitant About NXPI?

1. Sales tumbled by 3.3% annually over the last two years, showing market trends are working against its favor during this cycle
2. Sales are projected to tank by 1.6% over the next 12 months as its demand continues evaporating
3. 10.1 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

NXP Semiconductors is trading at $188.57 per share, or 15.4x forward P/E. Read our free research report to see why you should think twice about including NXPI in your portfolio.

Fresh Del Monte Produce (FDP)

Trailing 12-Month GAAP Operating Margin: 3.9%

Translating to "of the mountain" in Spanish, Fresh Del Monte (NYSE:FDP) is a leader in providing high-quality, sustainably grown fresh fruits and vegetables.

Why Should You Sell FDP?

1. Products fail to spark excitement with consumers, as seen in its flat sales over the last three years
2. Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 8.2%
3. ROIC of 5.3% reflects management’s challenges in identifying attractive investment opportunities

At $33.58 per share, Fresh Del Monte Produce trades at 8.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than FDP.

UniFirst (UNF)

Trailing 12-Month GAAP Operating Margin: 7.7%

With a fleet of trucks making weekly deliveries to over 300,000 customer locations, UniFirst (NYSE:UNF) provides, rents, cleans, and maintains workplace uniforms and protective clothing for businesses across various industries.

Why Is UNF Risky?

1. Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
2. Earnings per share fell by 2.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Underwhelming 7.3% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up

UniFirst’s stock price of $183.53 implies a valuation ratio of 22.7x forward P/E. Check out our free in-depth research report to learn more about why UNF doesn’t pass our bar.

Stocks We Like More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.