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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.

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here are three profitable companies to steer clear of and a few better alternatives.

Western Digital (WDC)

Trailing 12-Month GAAP Operating Margin: 20.2%

Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.

Why Should You Dump WDC?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 7.9% annually over the last five years

2. Gross margin of 14.5% is below its competitors, leaving less money to invest in areas like marketing and R&D

3. Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability

At $46.24 per share, Western Digital trades at 9.7x forward P/E. Read our free research report to see why you should think twice about including WDC in your portfolio, it’s free.

U-Haul (UHAL)

Trailing 12-Month GAAP Operating Margin: 12.8%

Founded by a husband and wife duo, U-Haul (NYSE:UHAL) is a provider of rental trucks and storage facilities.

Why Is UHAL Risky?

1. Annual sales declines of 1.6% for the past two years show its products and services struggled to connect with the market during this cycle

2. Free cash flow margin dropped by 38.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up

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

U-Haul is trading at $66.70 per share, or 2.3x trailing 12-month price-to-sales. Check out our free in-depth research report to learn more about why UHAL doesn’t pass our bar.

West Pharmaceutical Services (WST)

Trailing 12-Month GAAP Operating Margin: 19.1%

Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE:WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.

Why Does WST Fall Short?

1. Sales stagnated over the last two years and signal the need for new growth strategies

2. Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 5.7 percentage points

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