Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here are three profitable companies to steer clear of and a few better alternatives.
Microchip Technology (MCHP)
Trailing 12-Month GAAP Operating Margin: 2.6%
Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.
Why Should You Sell MCHP?
- Sales tumbled by 4.2% annually over the last five years, showing market trends are working against its favor during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 18.5% annually, worse than its revenue declines
- Free cash flow margin dropped by 15.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Microchip Technology is trading at $64.22 per share, or 36x forward P/E. Read our free research report to see why you should think twice about including MCHP in your portfolio.
Torrid (CURV)
Trailing 12-Month GAAP Operating Margin: 3.4%
Promoting a message of body positivity and inclusiveness, Torrid Holdings (NYSE: CURV) is a plus-size women’s apparel and accessories retailer.
Why Do We Steer Clear of CURV?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Torrid’s stock price of $1.48 implies a valuation ratio of 23.7x forward P/E. If you’re considering CURV for your portfolio, see our FREE research report to learn more.
Post (POST)
Trailing 12-Month GAAP Operating Margin: 10.4%
Founded in 1895, Post (NYSE: POST) is a packaged food company known for its namesake breakfast cereal and healthier-for-you snacks.
Why Are We Hesitant About POST?
- Declining unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Free cash flow margin shrank by 1.9 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
- ROIC of 5.8% reflects management’s challenges in identifying attractive investment opportunities
At $109.39 per share, Post trades at 14.4x forward P/E. Check out our free in-depth research report to learn more about why POST doesn’t pass our bar.
Stocks We Like More
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Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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