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While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.

Schneider (SNDR)

Trailing 12-Month GAAP Operating Margin: 3.3%

Employing thousands of drivers across the country to make deliveries, Schneider (NYSE:SNDR) makes full truckload and intermodal deliveries regionally and across borders.

Why Do We Avoid SNDR?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 8.5% annually over the last two years

2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 10.3% annually while its revenue grew

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $24.75 per share, Schneider trades at 25.2x forward P/E. Read our free research report to see why you should think twice about including SNDR in your portfolio, it’s free.

Luxfer (LXFR)

Trailing 12-Month GAAP Operating Margin: 10.6%

With its magnesium alloys used in the construction of the famous Spirit of St. Louis aircraft, Luxfer (NYSE:LXFR) offers specialized materials, components, and gas containment devices to various industries.

Why Do We Steer Clear of LXFR?

1. Muted 1.6% annual revenue growth over the last one years shows its demand lagged behind its industrials peers

2. 8.7 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

3. Diminishing returns on capital suggest its earlier profit pools are drying up

Luxfer is trading at $12.17 per share, or 11.6x forward P/E. To fully understand why you should be careful with LXFR, check out our full research report (it’s free).

Integer Holdings (ITGR)

Trailing 12-Month GAAP Operating Margin: 12.5%

With its name reflecting the mathematical term for "whole" or "complete," Integer Holdings (NYSE:ITGR) is a medical device outsource manufacturer that produces components and systems for cardiac, vascular, neurological, and other medical applications.

Why Are We Hesitant About ITGR?

1. Annual revenue growth of 6.5% over the last five years was below our standards for the healthcare sector

2. Subscale operations are evident in its revenue base of $1.75 billion, meaning it has fewer distribution channels than its larger rivals

3. Free cash flow margin shrank by 7.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive