Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are three profitable companies that don’t make the cut and some better opportunities instead.
GATX (GATX)
Trailing 12-Month GAAP Operating Margin: 30.5%
Originally founded to ship beer, GATX (NYSE: GATX) provides leasing and management services for railcars and other transportation assets globally.
Why Does GATX Fall Short?
- Performance surrounding its active railcars has lagged its peers
- 32.2 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
- High net-debt-to-EBITDA ratio of 9× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $145 per share, GATX trades at 16.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than GATX.
United Airlines (UAL)
Trailing 12-Month GAAP Operating Margin: 9.7%
Founded in 1926, United Airlines Holdings (NASDAQ: UAL) operates a global airline network, providing passenger and cargo air transportation services across domestic and international routes.
Why Should You Sell UAL?
- Demand for its offerings was relatively low as its number of revenue passenger miles has underwhelmed
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 6.8 percentage points
- ROIC of 5.6% reflects management’s challenges in identifying attractive investment opportunities
United Airlines is trading at $69.18 per share, or 6.5x forward price-to-earnings. To fully understand why you should be careful with UAL, check out our full research report (it’s free).
CSG (CSGS)
Trailing 12-Month GAAP Operating Margin: 11%
Powering billions of critical customer interactions annually, CSG Systems (NASDAQ: CSGS) provides cloud-based software platforms that help companies manage customer interactions, process payments, and monetize their services.
Why Do We Steer Clear of CSGS?
- Sales trends were unexciting over the last two years as its 4.8% annual growth was below the typical business services company
- Estimated sales decline of 4.3% for the next 12 months implies a challenging demand environment
- Free cash flow margin dropped by 5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
CSG’s stock price of $60.13 implies a valuation ratio of 13.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why CSGS doesn’t pass our bar.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
