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?
- Muted 1.1% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Cash burn makes us question whether it can achieve sustainable long-term growth
- 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?
- Annual revenue growth of 4.9% over the last five years was below our standards for the industrials sector
- 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
- 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?
- 6.8% annual revenue growth over the last two years was slower than its financials peers
- Annual earnings per share growth of 4.1% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- 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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