Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
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 Pass on ALTG?
- Sales trends were unexciting over the last two years as its 5.8% annual growth was below the typical industrials company
- Cash-burning history makes us doubt the long-term viability of its business model
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $4.75 per share, Alta trades at 0.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including ALTG in your portfolio.
MDU Resources (MDU)
Trailing 12-Month GAAP Operating Margin: 20.2%
Founded to provide electricity to towns in Minnesota, MDU Resources (NYSE: MDU) provides products and services in the utilities and construction materials industries.
Why Are We Out on MDU?
- Sales tumbled by 25.9% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share have contracted by 4.3% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
MDU Resources is trading at $17.06 per share, or 16.6x forward P/E. Check out our free in-depth research report to learn more about why MDU doesn’t pass our bar.
Robert Half (RHI)
Trailing 12-Month GAAP Operating Margin: 4.2%
With roots dating back to 1948 as the first specialized recruiting firm for accounting and finance professionals, Robert Half (NYSE: RHI) provides specialized talent solutions and business consulting services, connecting skilled professionals with companies across various fields.
Why Do We Avoid RHI?
- Sales tumbled by 1.5% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Eroding returns on capital suggest its historical profit centers are aging
Robert Half’s stock price of $45.35 implies a valuation ratio of 16.9x forward P/E. Dive into our free research report to see why there are better opportunities than RHI.
Stocks We Like More
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