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 to steer clear of and a few better alternatives.

Alta (ALTG)

Trailing 12-Month GAAP Operating Margin: 1.1%

Founded in 1984, Alta Equipment Group (NYSE: ALTG) is a provider of industrial and construction equipment and services across the Midwest and Northeast United States.

Why Do We Steer Clear of ALTG?

1. Muted 1.1% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Alta’s stock price of $4.19 implies a valuation ratio of 0.8x forward EV-to-EBITDA. To fully understand why you should be careful with ALTG, check out our full research report (it’s free for active Edge members).

Moog (MOG.A)

Trailing 12-Month GAAP Operating Margin: 9.1%

Responsible for the flight control actuation system integrated in the B-2 stealth bomber, Moog (NYSE: MOG.A) provides precision motion control solutions used in aerospace and defense applications

Why Does MOG.A Give Us Pause?

1. Annual revenue growth of 4.9% over the last five years was below our standards for the industrials sector
2. 6.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. ROIC of 7.9% reflects management’s challenges in identifying attractive investment opportunities

At $198.70 per share, Moog trades at 21.5x forward P/E. Check out our free in-depth research report to learn more about why MOG.A doesn’t pass our bar.

Voya Financial (VOYA)

Trailing 12-Month GAAP Operating Margin: 10.3%

Originally spun off from Dutch financial giant ING in 2013 and rebranded with a name suggesting "voyage," Voya Financial (NYSE: VOYA) provides workplace benefits and savings solutions to U.S. employers, helping their employees achieve better financial outcomes through retirement plans and insurance products.

Why Is VOYA Not Exciting?

1. 6.8% annual revenue growth over the last two years was slower than its financials peers
2. Annual earnings per share growth of 4.1% underperformed its revenue over the last two years, showing its incremental sales were less profitable
3. Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 14.6% annually over the last five years

Voya Financial is trading at $68.09 per share, or 7x forward P/E. If you’re considering VOYA for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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