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.
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 that don’t make the cut and some better opportunities instead.
Molson Coors (TAP)
Trailing 12-Month GAAP Operating Margin: 14.3%
Sporting an impressive roster of iconic beer brands, Molson Coors (NYSE:TAP) is a global brewing giant with a rich history dating back more than two centuries.
Why Do We Pass on TAP?
- Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $45.93 per share, Molson Coors trades at 8.3x forward P/E. To fully understand why you should be careful with TAP, check out our full research report (it’s free for active Edge members).
Atkore (ATKR)
Trailing 12-Month GAAP Operating Margin: 6.3%
Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.
Why Do We Think ATKR Will Underperform?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- 5.8 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
- Eroding returns on capital suggest its historical profit centers are aging
Atkore’s stock price of $62.18 implies a valuation ratio of 12x forward P/E. Read our free research report to see why you should think twice about including ATKR in your portfolio.
Zebra (ZBRA)
Trailing 12-Month GAAP Operating Margin: 15.3%
Taking its name from the black and white stripes of barcodes, Zebra Technologies (NASDAQ:ZBRA) provides barcode scanners, mobile computers, RFID systems, and other data capture technologies that help businesses track assets and optimize operations.
Why Should You Dump ZBRA?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.9% annually over the last two years
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings per share have contracted by 3.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Zebra is trading at $284.17 per share, or 18.5x forward P/E. If you’re considering ZBRA for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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