Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Subpar operating margin of 2.5% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- 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?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- 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?
- 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
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
- 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.
High-Quality Stocks for All Market Conditions
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