A company with profits isn’t always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.
Waste Management (WM)
Trailing 12-Month GAAP Operating Margin: 17.7%
Headquartered in Houston, Waste Management (NYSE: WM) is a provider of comprehensive waste management services in North America.
Why Does WM Give Us Pause?
- Annual sales growth of 7.2% over the last two years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6 percentage points
Waste Management’s stock price of $233.70 implies a valuation ratio of 30.1x forward P/E. Check out our free in-depth research report to learn more about why WM doesn’t pass our bar.
FARO (FARO)
Trailing 12-Month GAAP Operating Margin: 4.6%
Launched by two PhD students in a garage, FARO (NASDAQ: FARO) provides 3D measurement and imaging systems for the manufacturing, construction, engineering, and public safety industries.
Why Does FARO Fall Short?
- Annual sales declines of 1.5% for the past five years show its products and services struggled to connect with the market during this cycle
- Suboptimal cost structure is highlighted by its history of operating losses
- Negative free cash flow raises questions about the return timeline for its investments
FARO is trading at $42.15 per share, or 38.1x forward P/E. Read our free research report to see why you should think twice about including FARO in your portfolio.
Waters Corporation (WAT)
Trailing 12-Month GAAP Operating Margin: 28.3%
Founded in 1958 and pioneering innovations in laboratory analysis for over six decades, Waters (NYSE: WAT) develops and manufactures analytical instruments, software, and consumables for liquid chromatography, mass spectrometry, and thermal analysis used in scientific research and quality testing.
Why Do We Think Twice About WAT?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $344.06 per share, Waters Corporation trades at 26x forward P/E. If you’re considering WAT for your portfolio, see our FREE research report to learn more.
Stocks That Overcame Trump’s 2018 Tariffs
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 176% over the last five years.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
