3 Profitable Stocks We’re Skeptical Of

Barchart·06/03/2026 05:10:25

Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.

Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here are three profitable companies to avoid and some better opportunities instead.

Meritage Homes (MTH)

Trailing 12-Month GAAP Operating Margin: 8.5%

Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE:MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.

Why Are We Out on MTH?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.8% annually over the last two years
2. Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
3. Waning returns on capital imply its previous profit engines are losing steam

Meritage Homes is trading at $68.13 per share, or 13x forward P/E. If you’re considering MTH for your portfolio, see our FREE research report to learn more.

Fiserv (FISV)

Trailing 12-Month GAAP Operating Margin: 27.1%

Powering over 1 billion accounts and processing more than 12,000 financial transactions per second globally, Fiserv (NASDAQ:FISV) provides payment processing and financial technology solutions that enable merchants, banks, and credit unions to accept payments and manage financial transactions.

Why Do We Think FISV Will Underperform?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.1% over the last two years was below our standards for the financials sector
2. Annual earnings per share growth of 2.8% underperformed its revenue over the last two years, showing its incremental sales were less profitable
3. Underwhelming 9.6% return on equity reflects management’s difficulties in finding profitable growth opportunities

Fiserv’s stock price of $56.58 implies a valuation ratio of 7.3x forward P/E. Dive into our free research report to see why there are better opportunities than FISV.

PulteGroup (PHM)

Trailing 12-Month GAAP Operating Margin: 16.4%

Having delivered over 850,000 homes since its founding in 1950, PulteGroup (NYSE:PHM) is one of America's largest homebuilders, constructing single-family homes, townhouses, and condominiums for first-time, move-up, and active adult buyers across 46 markets in 25 states.

Why Do We Think Twice About PHM?

1. The company has faced growth challenges as its 1.2% annual revenue increases over the last two years fell short of other industrials companies
2. Earnings per share have dipped by 7.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Waning returns on capital imply its previous profit engines are losing steam

At $117.81 per share, PulteGroup trades at 11.5x forward P/E. Check out our free in-depth research report to learn more about why PHM doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.

Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.

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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

This article contains syndicated content. We have not reviewed, approved, or endorsed the content, and may receive compensation for placement of the content on this site. For more information please view the Barchart Disclosure Policy here.