Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
Altice (ATUS)
Trailing 12-Month GAAP Operating Margin: 18.4%
Based in Long Island City, Altice USA (NYSE: ATUS) is a telecommunications company offering cable, internet, telephone, and television services across the United States.
Why Do We Think ATUS Will Underperform?
- Demand for its offerings was relatively low as its number of broadband subscribers has underwhelmed
- Sales were less profitable over the last five years as its earnings per share fell by 27.4% annually, worse than its revenue declines
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Altice’s stock price of $2.32 implies a valuation ratio of 0.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including ATUS in your portfolio.
Choice Hotels (CHH)
Trailing 12-Month GAAP Operating Margin: 30.5%
With almost 100% of its properties under franchise agreements, Choice Hotels (NYSE: CHH) is a hotel franchisor known for its diverse brand portfolio including Comfort Inn, Quality Inn, and Clarion.
Why Do We Avoid CHH?
- Revenue per room has disappointed over the past two years due to weaker trends in its daily rates and occupancy levels
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Waning returns on capital imply its previous profit engines are losing steam
At $126.92 per share, Choice Hotels trades at 18.1x forward P/E. Check out our free in-depth research report to learn more about why CHH doesn’t pass our bar.
Wiley (WLY)
Trailing 12-Month GAAP Operating Margin: 13.9%
With roots dating back to 1807 when Charles Wiley opened a small printing shop in Manhattan, John Wiley & Sons (NYSE: WLY) is a global academic publisher that provides scientific journals, books, digital courseware, and knowledge solutions for researchers, students, and professionals.
Why Should You Dump WLY?
- Sales tumbled by 1.6% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share were flat over the last two years and fell short of the peer group average
- Free cash flow margin dropped by 4.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Wiley is trading at $39.30 per share, or 16.3x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than WLY.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
