Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.
LiveRamp (RAMP)
Trailing 12-Month GAAP Operating Margin: 2.3%
Serving as the digital middleman in an increasingly privacy-conscious world, LiveRamp (NYSE: RAMP) provides technology that helps companies securely share and connect their customer data with trusted partners while maintaining privacy compliance.
Why Are We Wary of RAMP?
- Annual revenue growth of 11.5% over the last three years was below our standards for the software sector
- ARR growth averaged a weak 8.9% over the last year, suggesting that competition is pulling some attention away from its software
- Estimated sales growth of 7.8% for the next 12 months implies demand will slow from its three-year trend
At $26.63 per share, LiveRamp trades at 2.2x forward price-to-sales. To fully understand why you should be careful with RAMP, check out our full research report (it’s free).
The Honest Company (HNST)
Trailing 12-Month GAAP Operating Margin: 1.1%
Co-founded by actress Jessica Alba, The Honest Company (NASDAQ: HNST) sells diapers and wipes, skin care products, and household cleaning products.
Why Do We Avoid HNST?
- Subscale operations are evident in its revenue base of $389.8 million, meaning it has fewer distribution channels than its larger rivals
- 6.6 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
- Negative returns on capital show management lost money while trying to expand the business
The Honest Company is trading at $3.81 per share, or 14.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than HNST.
Acadia Healthcare (ACHC)
Trailing 12-Month GAAP Operating Margin: 10%
With a network of over 250 facilities serving patients in 38 states and Puerto Rico, Acadia Healthcare (NASDAQ: ACHC) operates facilities providing mental health and substance use disorder treatment services across the United States.
Why Are We Cautious About ACHC?
- Disappointing admissions over the past two years imply it may need to invest in improvements to get back on track
- Free cash flow margin dropped by 24.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Acadia Healthcare’s stock price of $20.40 implies a valuation ratio of 7.6x forward P/E. If you’re considering ACHC for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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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-micro-cap company Kadant (+351% 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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