Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
Teradyne (TER)
Trailing 12-Month GAAP Operating Margin: 21.9%
Sporting most major chip manufacturers as its customers, Teradyne (NASDAQ: TER) is a US-based supplier of automated test equipment for semiconductors as well as other technologies and devices.
Why Are We Cautious About TER?
- Annual revenue growth of 3% over the last five years was below our standards for the semiconductor sector
- Anticipated sales growth of 2.3% for the next year implies demand will be shaky
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 7.9 percentage points
Teradyne’s stock price of $75 implies a valuation ratio of 20.8x forward P/E. If you’re considering TER for your portfolio, see our FREE research report to learn more.
America's Car-Mart (CRMT)
Trailing 12-Month GAAP Operating Margin: 5.9%
With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ: CRMT) sells used cars to budget-conscious consumers.
Why Do We Steer Clear of CRMT?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Gross margin of 20.2% is below its competitors, leaving less money for marketing and promotions
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
America's Car-Mart is trading at $46.71 per share, or 14.7x forward P/E. Dive into our free research report to see why there are better opportunities than CRMT.
ArcBest (ARCB)
Trailing 12-Month GAAP Operating Margin: 5.6%
Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ: ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.
Why Should You Dump ARCB?
- Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Earnings per share have dipped by 32.9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $58.93 per share, ArcBest trades at 9.2x forward P/E. To fully understand why you should be careful with ARCB, check out our full research report (it’s free).
Stocks That Overcame Trump’s 2018 Tariffs
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
