A company with profits isn’t always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

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 that don’t make the cut and some better opportunities instead.

American Eagle (AEO)

Trailing 12-Month GAAP Operating Margin: 8%

With a heavy focus on denim, American Eagle Outfitters (NYSE: AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.

Why Does AEO Worry Us?

1. Annual revenue growth of 4.3% over the last five years was below our standards for the consumer retail sector
2. Forecasted revenue decline of 2.7% for the upcoming 12 months implies demand will fall off a cliff
3. ROIC of 2.6% reflects management’s challenges in identifying attractive investment opportunities

American Eagle’s stock price of $11.14 implies a valuation ratio of 6.4x forward price-to-earnings. Read our free research report to see why you should think twice about including AEO in your portfolio.

Mondelez (MDLZ)

Trailing 12-Month GAAP Operating Margin: 17.4%

Founded as Nabisco in 1903, Mondelez (NASDAQ: MDLZ) is a packaged snacks powerhouse best known for its Oreo, Cadbury, Toblerone, Ritz, and Trident brands.

Why Do We Think Twice About MDLZ?

1. Estimated sales growth of 3.4% for the next 12 months implies demand will slow from its three-year trend
2. Free cash flow margin didn’t grow over the last year
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $65.50 per share, Mondelez trades at 20.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than MDLZ.

Steelcase (SCS)

Trailing 12-Month GAAP Operating Margin: 3.5%

Founded in 1912 when metal office furniture was replacing wooden alternatives, Steelcase (NYSE: SCS) is a global office furniture manufacturer that designs and produces workplace solutions including desks, chairs, architectural products, and services.

Why Should You Sell SCS?

1. Annual sales declines of 3.2% for the past five years show its products and services struggled to connect with the market during this cycle
2. Earnings per share have contracted by 5.8% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
3. ROIC of 6.4% reflects management’s challenges in identifying attractive investment opportunities

Steelcase is trading at $9.94 per share, or 9.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why SCS doesn’t pass our bar.

Stocks We Like More

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Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.