Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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

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 to avoid and some better opportunities instead.

Meritage Homes (MTH)

Trailing 12-month GAAP operating margin: 7.3%

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 Should You Sell MTH?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 24.4% decline in its backlog
2. Diminishing returns on capital suggest its earlier profit pools are drying up
3. 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

At $64.48 per share, Meritage Homes trades at 11.5x forward P/E. Dive into our free research report to see why there are better opportunities than MTH.

Labcorp (LH)

Trailing 12-month GAAP operating margin: 10.3%

With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE:LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.

Why Does LH Give Us Pause?

1. Annual sales declines of 2.5% for the past five years show its products and services struggled to connect with the market during this cycle
2. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
3. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 10.9% annually, worse than its revenue

Labcorp is trading at $368.70 per share, or 18.7x forward P/E. Check out our free in-depth research report to learn more about why LH doesn’t pass our bar.

Amphastar Pharmaceuticals (AMPH)

Trailing 12-month GAAP operating margin: 18.8%

Founded in 1996 and known for its expertise in complex drug formulations, Amphastar Pharmaceuticals (NASDAQ:AMPH) develops and manufactures technically challenging injectable and inhalation medications, including both generic and proprietary pharmaceutical products.

Why Does AMPH Worry Us?

1. Sales trends were unexciting over the last two years as its 1.2% annual growth was below the typical healthcare company
2. Subscale operations are evident in its revenue base of $730 million, meaning it has fewer distribution channels than its larger rivals
3. Efficiency has decreased over the last two years as its adjusted operating margin fell by 12.7 percentage points

Amphastar Pharmaceuticals’s stock price of $26.93 implies a valuation ratio of 8.3x forward P/E. Read our free research report to see why you should think twice about including AMPH in your portfolio.

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.