Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 that don’t make the cut and some better opportunities instead.

Nordstrom (JWN)

Trailing 12-Month GAAP Operating Margin: 3.3%

Known for its exceptional customer service that features a ‘no questions asked’ return policy, Nordstrom (NYSE: JWN) is a high-end department store chain.

Why Should You Sell JWN?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Subpar operating margin of 2.5% constrains its ability to invest in process improvements or effectively respond to new competitive threats
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Nordstrom is trading at $24.64 per share, or 11.8x forward P/E. To fully understand why you should be careful with JWN, check out our full research report (it’s free).

Clean Harbors (CLH)

Trailing 12-Month GAAP Operating Margin: 11%

Established in 1980, Clean Harbors (NYSE: CLH) provides environmental and industrial services like hazardous and non-hazardous waste disposal and emergency spill cleanups.

Why Are We Hesitant About CLH?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.3 percentage points

Clean Harbors’s stock price of $232.46 implies a valuation ratio of 29.3x forward P/E. If you’re considering CLH for your portfolio, see our FREE research report to learn more.

Teledyne (TDY)

Trailing 12-Month GAAP Operating Margin: 17.6%

Playing a role in mapping the ocean floor as we know it today, Teledyne (NYSE: TDY) offers digital imaging and instrumentation products for various industries.

Why Does TDY Fall Short?

1. 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
2. Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $497.04 per share, Teledyne trades at 22.4x forward P/E. Check out our free in-depth research report to learn more about why TDY doesn’t pass our bar.

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