Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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. That said, here are three profitable companies to avoid and some better opportunities instead.

Getty Images (GETY)

Trailing 12-Month GAAP Operating Margin: 17.8%

With a vast library of over 562 million visual assets documenting everything from breaking news to iconic historical moments, Getty Images (NYSE: GETY) is a global visual content marketplace that licenses photos, videos, illustrations, and music to businesses, media outlets, and creative professionals.

Why Do We Pass on GETY?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Free cash flow margin shrank by 7.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Getty Images’s stock price of $1.78 implies a valuation ratio of 2.5x forward EV-to-EBITDA. If you’re considering GETY for your portfolio, see our FREE research report to learn more.

WideOpenWest (WOW)

Trailing 12-Month GAAP Operating Margin: 1.6%

Initially started in Denver as a cable television provider, WideOpenWest (NYSE: WOW) provides high-speed internet, cable, and telephone services to the Midwest and Southeast regions of the U.S.

Why Should You Dump WOW?

1. Performance surrounding its subscribers has lagged its peers
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

WideOpenWest is trading at $4.17 per share, or 1.3x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why WOW doesn’t pass our bar.

Accenture (ACN)

Trailing 12-Month GAAP Operating Margin: 15%

With a workforce of approximately 774,000 people serving clients in more than 120 countries, Accenture (NYSE: ACN) is a professional services firm that helps organizations transform their businesses through consulting, technology, operations, and digital services.

Why Do We Think Twice About ACN?

1. Annual sales growth of 3.1% over the last two years lagged behind its business services peers as its large revenue base made it difficult to generate incremental demand
2. 5.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $316.02 per share, Accenture trades at 24.3x forward P/E. Read our free research report to see why you should think twice about including ACN in your portfolio.

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