Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are three profitable companies to steer clear of and a few better alternatives.
Global Business Travel (GBTG)
Trailing 12-Month GAAP Operating Margin: 6.3%
Holding close ties to American Express, Global Business Travel (NYSE: GBTG) is a comprehensive travel and expense management services provider to corporations worldwide.
Why Are We Wary of GBTG?
- Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its three-year trend
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 60.8%
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.9% for the last year
Global Business Travel is trading at $6.33 per share, or 1.2x forward price-to-sales. If you’re considering GBTG for your portfolio, see our FREE research report to learn more.
Haemonetics (HAE)
Trailing 12-Month GAAP Operating Margin: 16.3%
With roots dating back to 1971 and a mission to improve blood-related healthcare, Haemonetics (NYSE: HAE) provides specialized medical devices and software for blood collection, processing, and management across plasma centers, blood banks, and hospitals.
Why Does HAE Worry Us?
- Sales trends were unexciting over the last five years as its 6.6% annual growth was below the typical healthcare company
- Subscale operations are evident in its revenue base of $1.36 billion, meaning it has fewer distribution channels than its larger rivals
- Projected sales decline of 4.6% for the next 12 months points to a tough demand environment ahead
At $74.77 per share, Haemonetics trades at 15.2x forward P/E. To fully understand why you should be careful with HAE, check out our full research report (it’s free).
UL Solutions (ULS)
Trailing 12-Month GAAP Operating Margin: 16.5%
Founded in 1894 as a response to the growing dangers of electricity in American homes and businesses, UL Solutions (NYSE: ULS) provides testing, inspection, and certification services that help companies ensure their products meet safety, security, and sustainability standards.
Why Is ULS Not Exciting?
- Muted 4.3% annual revenue growth over the last three years shows its demand lagged behind its business services peers
UL Solutions’s stock price of $72.17 implies a valuation ratio of 41.2x forward P/E. Check out our free in-depth research report to learn more about why ULS doesn’t pass our bar.
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