Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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

YETI (YETI)

Trailing 12-Month GAAP Operating Margin: 13.1%

Founded by two brothers from Texas, YETI (NYSE: YETI) specializes in durable outdoor goods including coolers, drinkware, and other gear tailored to adventure enthusiasts.

Why Are We Wary of YETI?

1. Annual revenue growth of 7.1% over the last two years was below our standards for the consumer discretionary sector
2. Estimated sales growth of 3.4% for the next 12 months implies demand will slow from its two-year trend
3. Eroding returns on capital suggest its historical profit centers are aging

YETI’s stock price of $39.70 implies a valuation ratio of 14.7x forward P/E. Read our free research report to see why you should think twice about including YETI in your portfolio.

Hayward (HAYW)

Trailing 12-Month GAAP Operating Margin: 19.8%

Credited with introducing the first variable-speed pool pump, Hayward (NYSE: HAYW) makes residential and commercial pool equipment and accessories.

Why Do We Steer Clear of HAYW?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.6%
3. Earnings per share have dipped by 17.7% annually over the past three years, which is concerning because stock prices follow EPS over the long term

Hayward is trading at $15.30 per share, or 19.8x forward P/E. If you’re considering HAYW for your portfolio, see our FREE research report to learn more.

Integra LifeSciences (IART)

Trailing 12-Month GAAP Operating Margin: 10.3%

Founded in 1989 as a pioneer in regenerative medicine technology, Integra LifeSciences (NASDAQ: IART) develops and manufactures medical technologies for neurosurgery, wound care, and surgical reconstruction, including regenerative tissue products and surgical instruments.

Why Do We Pass on IART?

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. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 1.2% annually
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 17.1 percentage points

At $12.51 per share, Integra LifeSciences trades at 4.9x forward P/E. Read our free research report to see why you should think twice about including IART in your portfolio.

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