Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are three profitable companies to steer clear of and a few better alternatives.

YETI (YETI)

Trailing 12-Month GAAP Operating Margin: 12%

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 Is YETI Not Exciting?

1. Annual revenue growth of 6.6% over the last two years was below our standards for the consumer discretionary sector
2. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 9.7 percentage points over the next year
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $36.01 per share, YETI trades at 13.7x forward P/E. Check out our free in-depth research report to learn more about why YETI doesn’t pass our bar.

Casella Waste Systems (CWST)

Trailing 12-Month GAAP Operating Margin: 3.9%

Starting with the founder picking up garbage with a pickup truck he purchased using savings from high school, Casella (NASDAQ: CWST) offers waste management services for businesses, residents, and the government.

Why Do We Think Twice About CWST?

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. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 5 percentage points
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up

Casella Waste Systems’s stock price of $89.54 implies a valuation ratio of 72x forward P/E. To fully understand why you should be careful with CWST, check out our full research report (it’s free for active Edge members).

Kforce (KFRC)

Trailing 12-Month GAAP Operating Margin: 4.3%

With nearly 60 years of matching skilled professionals with the right opportunities, Kforce (NYSE: KFRC) is a professional staffing company that specializes in placing technology and finance experts with businesses on both temporary and permanent bases.

Why Should You Dump KFRC?

1. Sales were flat over the last five years, indicating it’s failed to expand this cycle
2. Earnings per share have dipped by 1.4% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. Eroding returns on capital suggest its historical profit centers are aging

Kforce is trading at $30.10 per share, or 13.9x forward P/E. If you’re considering KFRC for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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