Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

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 steer clear of and a few better alternatives.

Boyd Gaming (BYD)

Trailing 12-Month GAAP Operating Margin: 22.9%

Run by the Boyd family, Boyd Gaming (NYSE: BYD) is a diversified operator of gaming entertainment properties across the United States, offering casino games, hotel accommodations, and dining.

Why Does BYD Give Us Pause?

1. Annual revenue growth of 4.1% over the last two years was below our standards for the consumer discretionary sector
2. Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $81.57 per share, Boyd Gaming trades at 12.7x forward P/E. Check out our free in-depth research report to learn more about why BYD doesn’t pass our bar.

Global Industrial (GIC)

Trailing 12-Month GAAP Operating Margin: 6.2%

Formerly known as Systemax, Global Industrial (NYSE: GIC) distributes industrial and commercial products to businesses and institutions.

Why Is GIC Risky?

1. Muted 5.7% annual revenue growth over the last four years shows its demand lagged behind its industrials peers
2. Incremental sales over the last two years were much less profitable as its earnings per share fell by 6.8% annually while its revenue grew
3. Eroding returns on capital suggest its historical profit centers are aging

Global Industrial is trading at $28.28 per share, or 17.7x forward P/E. If you’re considering GIC for your portfolio, see our FREE research report to learn more.

Silgan Holdings (SLGN)

Trailing 12-Month GAAP Operating Margin: 8.9%

Established in 1987, Silgan Holdings (NYSE: SLGN) is a supplier of rigid packaging for consumer goods products, specializing in metal containers, closures, and plastic packaging.

Why Are We Out on SLGN?

1. Annual sales declines of 3% for the past two years show its products and services struggled to connect with the market during this cycle
2. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
3. Earnings per share have dipped by 2.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term

Silgan Holdings’s stock price of $56.67 implies a valuation ratio of 13.6x forward P/E. Dive into our free research report to see why there are better opportunities than SLGN.

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