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.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here are three profitable companies to avoid and some better opportunities instead.
Live Nation (LYV)
Trailing 12-Month GAAP Operating Margin: 4.3%
Owner of Ticketmaster and operator of music festival EDC, Live Nation (NYSE:LYV) is a company specializing in live event promotion, venue management, and ticketing services for concerts and shows.
Why Does LYV Fall Short?
- Number of events has disappointed over the past two years, indicating weak demand for its offerings
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Free cash flow margin is forecasted to shrink by 1.9 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
Live Nation is trading at $149.44 per share, or 63.7x forward P/E. If you’re considering LYV for your portfolio, see our FREE research report to learn more.
GMS (GMS)
Trailing 12-Month GAAP Operating Margin: 4.7%
Founded in 1971, GMS (NYSE:GMS) distributes specialty building materials including wallboard, ceilings, and insulation products, to the construction industry.
Why Do We Think Twice About GMS?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- Earnings per share have dipped by 18.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
GMS’s stock price of $109.66 implies a valuation ratio of 17.8x forward P/E. Check out our free in-depth research report to learn more about why GMS doesn’t pass our bar.
Mettler-Toledo (MTD)
Trailing 12-Month GAAP Operating Margin: 28.7%
With roots dating back to the precision balance innovations of Swiss engineer Erhard Mettler, Mettler-Toledo (NYSE:MTD) manufactures precision weighing instruments, analytical equipment, and product inspection systems used in laboratories, industrial settings, and food retail.
Why Is MTD Not Exciting?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.5% 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
- Anticipated sales growth of 3.4% for the next year implies demand will be shaky
At $1,169 per share, Mettler-Toledo trades at 26.9x forward P/E. Dive into our free research report to see why there are better opportunities than MTD.
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