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.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.
Mettler-Toledo (MTD)
Trailing 12-Month GAAP Operating Margin: 28.1%
With roots dating back to the precision balance innovations of Swiss engineer Erhard Mettler, Mettler-Toledo (NYSE: MTD) manufactures precision weighing instruments, analytical equipment, and product inspection systems used in laboratories, industrial settings, and food retail.
Why Are We Cautious About MTD?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 1.4 percentage points
Mettler-Toledo’s stock price of $1,459 implies a valuation ratio of 33.6x forward P/E. If you’re considering MTD for your portfolio, see our FREE research report to learn more.
Taboola (TBLA)
Trailing 12-Month GAAP Operating Margin: 2.5%
Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ: TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.
Why Are We Hesitant About TBLA?
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 1.3 percentage points
- Earnings per share have contracted by 25.3% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- Negative returns on capital show that some of its growth strategies have backfired
At $4.17 per share, Taboola trades at 9.5x forward P/E. Check out our free in-depth research report to learn more about why TBLA doesn’t pass our bar.
Prudential (PRU)
Trailing 12-Month GAAP Operating Margin: 5.9%
Recognized by its iconic Rock of Gibraltar logo symbolizing strength and stability since 1896, Prudential Financial (NYSE: PRU) provides life insurance, annuities, retirement solutions, investment management, and other financial services to individual and institutional customers globally.
Why Are We Out on PRU?
- Net premiums earned contracted by 3.1% annually over the last five years, showing unfavorable market dynamics this cycle
- Annual book value per share declines of 11.3% for the past five years show its capital management struggled during this cycle
- High debt-to-equity ratio of 1.3× shows the firm carries too much debt relative to shareholder equity, increasing bankruptcy risk
Prudential is trading at $111.77 per share, or 1.3x forward P/B. Read our free research report to see why you should think twice about including PRU in your portfolio.
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