Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
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.
Mission Produce (AVO)
Trailing 12-Month GAAP Operating Margin: 4.6%
Founded in 1983 in California, Mission Produce (NASDAQ: AVO) grows, packages, and distributes avocados.
Why Should You Dump AVO?
- Smaller revenue base of $1.43 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Estimated sales decline of 7.1% for the next 12 months implies a challenging demand environment
- Gross margin of 11.1% is below its competitors, leaving less money to invest in areas like marketing and production facilities
At $11.67 per share, Mission Produce trades at 17.4x forward P/E. Dive into our free research report to see why there are better opportunities than AVO.
Brunswick (BC)
Trailing 12-Month GAAP Operating Margin: -2.7%
Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.
Why Is BC Risky?
- Annual revenue declines of 11.5% over the last two years indicate problems with its market positioning
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 7.9 percentage points over the next year
- Waning returns on capital imply its previous profit engines are losing steam
Brunswick’s stock price of $70.93 implies a valuation ratio of 17.8x forward P/E. If you’re considering BC for your portfolio, see our FREE research report to learn more.
Planet Fitness (PLNT)
Trailing 12-Month GAAP Operating Margin: 28.2%
Founded by two brothers who purchased a struggling gym, Planet Fitness (NYSE: PLNT) is a gym franchise that caters to casual fitness users by providing a friendly and inclusive atmosphere.
Why Do We Think Twice About PLNT?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience
- Projected sales growth of 9% for the next 12 months suggests sluggish demand
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Planet Fitness is trading at $96.30 per share, or 30.1x forward P/E. To fully understand why you should be careful with PLNT, check out our full research report (it’s free for active Edge members).
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