Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
ABM (ABM)
Trailing 12-Month GAAP Operating Margin: 3.6%
With roots dating back to 1909 as a window washing company, ABM Industries (NYSE: ABM) provides integrated facility management, infrastructure, and mobility solutions across various sectors including commercial, manufacturing, education, and aviation.
Why Are We Hesitant About ABM?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
- Lacking free cash flow margin got worse over the last five years as its investment needs accelerated
At $43.30 per share, ABM trades at 11x forward P/E. Dive into our free research report to see why there are better opportunities than ABM.
Merit Medical Systems (MMSI)
Trailing 12-Month GAAP Operating Margin: 11.3%
Founded in 1987 and now offering over 1,700 patented products across global markets, Merit Medical Systems (NASDAQ: MMSI) manufactures and markets specialized medical devices used in minimally invasive procedures for cardiology, radiology, oncology, critical care, and endoscopy.
Why Are We Wary of MMSI?
- Smaller revenue base of $1.48 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- ROIC of 4.9% reflects management’s challenges in identifying attractive investment opportunities
Merit Medical Systems’s stock price of $92.15 implies a valuation ratio of 23.9x forward P/E. To fully understand why you should be careful with MMSI, check out our full research report (it’s free for active Edge members).
CSG (CSGS)
Trailing 12-Month GAAP Operating Margin: 11.9%
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 Think Twice About CSGS?
- Annual revenue growth of 1.6% over the last two years was below our standards for the business services sector
- Estimated sales growth of 1.5% for the next 12 months is soft and implies weaker demand
- Diminishing returns on capital suggest its earlier profit pools are drying up
CSG is trading at $79.40 per share, or 15.4x forward P/E. Read our free research report to see why you should think twice about including CSGS in your portfolio.
Stocks We Like More
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The names generating the next wave of massive growth are right here in our 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
