Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.

Dayforce (DAY)

Trailing 12-Month GAAP Operating Margin: 5.2%

Founded in 1992 as Ceridian, an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Dayforce (NYSE: DAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.

Why Do We Think Twice About DAY?

1. Annual revenue growth of 18.7% over the last three years was below our standards for the software sector
2. Sky-high servicing costs result in an inferior gross margin of 50.3% that must be offset through increased usage
3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 3.4 percentage points

Dayforce’s stock price of $55.25 implies a valuation ratio of 4.5x forward price-to-sales. Check out our free in-depth research report to learn more about why DAY doesn’t pass our bar.

PVH (PVH)

Trailing 12-Month GAAP Operating Margin: 2.7%

Founded in 1881 by a husband and wife duo, PVH (NYSE: PVH) is a global fashion conglomerate with iconic brands like Calvin Klein and Tommy Hilfiger.

Why Is PVH Risky?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Projected sales growth of 1.9% for the next 12 months suggests sluggish demand
3. Underwhelming 2.9% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $73.94 per share, PVH trades at 5.6x forward P/E. Read our free research report to see why you should think twice about including PVH in your portfolio.

Hyster-Yale Materials Handling (HY)

Trailing 12-Month GAAP Operating Margin: 4.8%

Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE: HY) designs, manufactures, and sells materials handling equipment to various sectors.

Why Does HY Give Us Pause?

1. 5.1% annual revenue growth over the last five years was slower than its industrials peers
2. Estimated sales decline of 5.1% for the next 12 months implies a challenging demand environment
3. Low free cash flow margin of 0.5% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Hyster-Yale Materials Handling is trading at $42.40 per share, or 4.8x forward EV-to-EBITDA. To fully understand why you should be careful with HY, check out our full research report (it’s free).

Stocks We Like More

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 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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