Even if a company is profitable, it doesn’t always mean it’s 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. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.
Lowe's (LOW)
Trailing 12-Month GAAP Operating Margin: 12.4%
Founded in North Carolina as Lowe's North Wilkesboro Hardware, the company is a home improvement retailer that sells everything from paint to tools to building materials.
Why Are We Wary of LOW?
- Annual sales growth of 2.6% over the last six years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
Lowe's is trading at $232.01 per share, or 18.3x forward P/E. If you’re considering LOW for your portfolio, see our FREE research report to learn more.
Wabash (WNC)
Trailing 12-Month GAAP Operating Margin: 22.6%
With its first trailer reportedly built on two sawhorses, Wabash (NYSE: WNC) offers semi trailers, liquid transportation containers, truck bodies, and equipment for moving goods.
Why Do We Pass on WNC?
- Backlog has dropped by 36.2% on average over the past two years, suggesting it’s losing orders as competition picks up
- Earnings per share have contracted by 39.2% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- 37× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $7.77 per share, Wabash trades at 4.7x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including WNC in your portfolio.
FTI Consulting (FCN)
Trailing 12-Month GAAP Operating Margin: 9.4%
With a team of experts deployed across 30+ countries to tackle complex business challenges, FTI Consulting (NYSE: FCN) is a global business advisory firm that helps organizations manage change, mitigate risk, and resolve disputes across financial, legal, operational, and regulatory matters.
Why Is FCN Not Exciting?
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 2.7 percentage points
- Free cash flow margin dropped by 9.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Low returns on capital reflect management’s struggle to allocate funds effectively
FTI Consulting’s stock price of $164.47 implies a valuation ratio of 19.4x forward P/E. Dive into our free research report to see why there are better opportunities than FCN.
Stocks We Like More
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