Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 steer clear of and a few better alternatives.
Wix (WIX)
Trailing 12-Month GAAP Operating Margin: 7%
Founded in 2006 in Tel Aviv, Wix.com (NASDAQ: WIX) offers a free and easy to operate website building platform.
Why Are We Hesitant About WIX?
- 11.5% annual revenue growth over the last three years was slower than its software peers
- High servicing costs result in a relatively inferior gross margin of 68.1% that must be offset through increased usage
Wix’s stock price of $156.30 implies a valuation ratio of 4.6x forward price-to-sales. To fully understand why you should be careful with WIX, check out our full research report (it’s free).
Accel Entertainment (ACEL)
Trailing 12-Month GAAP Operating Margin: 7.3%
Established in Illinois, Accel Entertainment (NYSE: ACEL) is a provider of electronic gaming machines and interactive amusement terminals to bars and entertainment venues.
Why Is ACEL Not Exciting?
- Number of video gaming terminals sold has disappointed over the past two years, indicating weak demand for its offerings
- Estimated sales growth of 6.5% for the next 12 months implies demand will slow from its two-year trend
- Low free cash flow margin of 4.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $11.24 per share, Accel Entertainment trades at 12.2x forward P/E. Check out our free in-depth research report to learn more about why ACEL doesn’t pass our bar.
Lindblad Expeditions (LIND)
Trailing 12-Month GAAP Operating Margin: 4.5%
Founded by explorer Sven-Olof Lindblad in 1979, Lindblad Expeditions (NASDAQ: LIND) offers cruising experiences to remote destinations in partnership with National Geographic.
Why Should You Dump LIND?
- 14.9% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 70.6% annually
- Push for growth has led to negative returns on capital, signaling value destruction
Lindblad Expeditions is trading at $10.86 per share, or 5.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LIND in your portfolio.
High-Quality Stocks for All Market Conditions
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