Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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. Keeping that in mind, here are three profitable companies to avoid and some better opportunities instead.
Sprinklr (CXM)
Trailing 12-Month GAAP Operating Margin: 4%
With a proprietary AI engine processing 450 million data points daily across 30+ digital channels, Sprinklr (NYSE: CXM) provides cloud-based software that helps large enterprises manage customer experiences across social, messaging, chat, and voice channels.
Why Should You Dump CXM?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 3.1% underwhelmed
- Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its two-year trend
- Operating margin didn’t move over the last year, showing it couldn’t increase its efficiency
Sprinklr is trading at $7.54 per share, or 2.3x forward price-to-sales. To fully understand why you should be careful with CXM, check out our full research report (it’s free for active Edge members).
Campbell's (CPB)
Trailing 12-Month GAAP Operating Margin: 11%
With its iconic canned soup as its cornerstone product, Campbell's (NASDAQ: CPB) is a packaged food company with an illustrious portfolio of brands.
Why Do We Avoid CPB?
- Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Projected sales decline of 3.1% for the next 12 months points to a tough demand environment ahead
- Performance over the past three years shows its incremental sales were less profitable, as its 1.6% annual earnings per share growth trailed its revenue gains
Campbell’s stock price of $30.37 implies a valuation ratio of 12.2x forward P/E. Read our free research report to see why you should think twice about including CPB in your portfolio.
Newmark (NMRK)
Trailing 12-Month GAAP Operating Margin: 4.9%
Founded in 1929, Newmark (NASDAQ: NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.
Why Is NMRK Risky?
- Sales trends were unexciting over the last five years as its 10.3% annual growth was below the typical consumer discretionary company
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Underwhelming 2.6% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $16.87 per share, Newmark trades at 9.8x forward P/E. To fully understand why you should be careful with NMRK, check out our full research report (it’s free for active Edge members).
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