Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 steer clear of and a few better alternatives.
Parker-Hannifin (PH)
Trailing 12-Month GAAP Operating Margin: 20.1%
Founded in 1917, Parker Hannifin (NYSE:PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Are We Wary of PH?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Estimated sales growth of 2% for the next 12 months implies demand will slow from its two-year trend
- Free cash flow margin dropped by 2.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Parker-Hannifin is trading at $671.26 per share, or 23.6x forward P/E. Check out our free in-depth research report to learn more about why PH doesn’t pass our bar.
DistributionNOW (DNOW)
Trailing 12-Month GAAP Operating Margin: 4.8%
Spun off from National Oilwell Varco, DistributionNOW (NYSE:DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.
Why Should You Dump DNOW?
- Sales tumbled by 2.8% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share have contracted by 6.3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.8 percentage points
DistributionNOW’s stock price of $14.74 implies a valuation ratio of 10.2x forward EV-to-EBITDA. To fully understand why you should be careful with DNOW, check out our full research report (it’s free).
Albany (AIN)
Trailing 12-Month GAAP Operating Margin: 10%
Founded in 1895, Albany (NYSE:AIN) is a global textiles and materials processing company, specializing in machine clothing for paper mills and engineered composite structures for aerospace and other industries.
Why Is AIN Risky?
- 3% annual revenue growth over the last five years was slower than its industrials peers
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 9 percentage points
- Earnings per share fell by 5.6% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
At $67.06 per share, Albany trades at 10.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than AIN.
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 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.