Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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. That said, here are three profitable companies to steer clear of and a few better alternatives.

Lindsay (LNN)

Trailing 12-Month GAAP Operating Margin: 13.3%

A pioneer in the field of center pivot and lateral move irrigation, Lindsay (NYSE: LNN) provides a variety of proprietary water management and road infrastructure products and services.

Why Does LNN Give Us Pause?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Sales are projected to tank by 2.6% over the next 12 months as its demand continues evaporating
3. Earnings per share lagged its peers over the last two years as they only grew by 4% annually

Lindsay is trading at $140.73 per share, or 22.1x forward P/E. To fully understand why you should be careful with LNN, check out our full research report (it’s free).

GXO Logistics (GXO)

Trailing 12-Month GAAP Operating Margin: 1.7%

With notable customers such as Nike and Apple, GXO (NYSE: GXO) manages outsourced supply chains and warehousing for various companies.

Why Is GXO Not Exciting?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 2.2% annually
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

GXO Logistics’s stock price of $53.63 implies a valuation ratio of 19.3x forward P/E. Read our free research report to see why you should think twice about including GXO in your portfolio.

Lockheed Martin (LMT)

Trailing 12-Month GAAP Operating Margin: 8.3%

Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.

Why Should You Sell LMT?

1. Average backlog growth of 7.3% over the past two years was mediocre and suggests fewer customers signed long-term contracts
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 4.9% annually while its revenue grew
3. Waning returns on capital imply its previous profit engines are losing steam

At $438.30 per share, Lockheed Martin trades at 15.5x forward P/E. Check out our free in-depth research report to learn more about why LMT doesn’t pass our bar.

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