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. That said, here are three profitable companies that don’t make the cut and some better opportunities instead.
CarGurus (CARG)
Trailing 12-Month GAAP Operating Margin: 3.6%
Bringing transparency to a sometimes opaque process, CarGurus (NASDAQ: CARG) is a digital marketplace where auto dealers can connect with potential customers and where car buyers can browse, purchase, and obtain financing.
Why Are We Wary of CARG?
- Market opportunities are plateauing as its paying dealers were flat over the last two years
- Anticipated sales growth of 5.6% for the next year implies demand will be shaky
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 7.5% annually
At $31.68 per share, CarGurus trades at 11.6x forward EV/EBITDA. Check out our free in-depth research report to learn more about why CARG doesn’t pass our bar.
Hyster-Yale Materials Handling (HY)
Trailing 12-Month GAAP Operating Margin: 4.8%
Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE: HY) designs, manufactures, and sells materials handling equipment to various sectors.
Why Does HY Give Us Pause?
- Muted 5.1% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Estimated sales decline of 5.1% for the next 12 months implies a challenging demand environment
- Poor free cash flow margin of 0.5% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Hyster-Yale Materials Handling is trading at $39.65 per share, or 4.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including HY in your portfolio.
NVR (NVR)
Trailing 12-Month GAAP Operating Margin: 18.1%
Known for its unique land acquisition strategy, NVR (NYSE: NVR) is a respected homebuilder and mortgage company in the United States.
Why Are We Cautious About NVR?
- Average backlog growth of 1.5% over the past two years was mediocre and suggests fewer customers signed long-term contracts
- Forecasted revenue decline of 8.2% for the upcoming 12 months implies demand will fall off a cliff
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 1.1% annually
NVR’s stock price of $7,150 implies a valuation ratio of 14.8x forward P/E. Dive into our free research report to see why there are better opportunities than NVR.
Stocks We Like More
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
