Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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. That said, here are three profitable companies to avoid and some better opportunities instead.

Central Garden & Pet (CENT)

Trailing 12-Month GAAP Operating Margin: 8.3%

Enhancing the lives of both pets and homeowners, Central Garden & Pet (NASDAQ: CENT) is a leading producer and distributor of essential products for pet care, lawn and garden maintenance, and pest control.

Why Are We Out on CENT?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Estimated sales for the next 12 months are flat and imply a softer demand environment
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging

Central Garden & Pet’s stock price of $33.24 implies a valuation ratio of 11.9x forward P/E. To fully understand why you should be careful with CENT, check out our full research report (it’s free).

Cushman & Wakefield (CWK)

Trailing 12-Month GAAP Operating Margin: 4.5%

With expertise in the commercial real estate sector, Cushman & Wakefield (NYSE: CWK) is a global Chicago-based real estate firm offering a comprehensive range of services to clients.

Why Is CWK Risky?

1. Annual sales growth of 4.1% over the last five years lagged behind its consumer discretionary peers as its large revenue base made it difficult to generate incremental demand
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2.2% for the last two years
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Cushman & Wakefield is trading at $17.07 per share, or 12x forward P/E. If you’re considering CWK for your portfolio, see our FREE research report to learn more.

Vishay Precision (VPG)

Trailing 12-Month GAAP Operating Margin: 2.9%

Emerging from Vishay Intertechnology in 2010, Vishay Precision (NYSE: VPG) operates as a global provider of precision measurement and sensing technologies.

Why Should You Dump VPG?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 9% annually over the last two years
2. Earnings per share fell by 15.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $43.73 per share, Vishay Precision trades at 44.2x forward P/E. Check out our free in-depth research report to learn more about why VPG doesn’t pass our bar.

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