Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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. Keeping that in mind, here are three profitable companies to avoid and some better opportunities instead.
Ryder (R)
Trailing 12-Month GAAP Operating Margin: 8.4%
As one of the first companies to introduce the idea of leasing trucks, Ryder (NYSE: R) provides rental vehicles to businesses and delivers packages directly to homes or businesses.
Why Do We Think R Will Underperform?
- Sizable revenue base leads to growth challenges as its 3.5% annual revenue increases over the last two years fell short of other industrials companies
- Earnings per share have contracted by 4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- 5.8 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Ryder is trading at $165.78 per share, or 12x forward P/E. Check out our free in-depth research report to learn more about why R doesn’t pass our bar.
Graco (GGG)
Trailing 12-Month GAAP Operating Margin: 27.2%
Founded in 1926, Graco (NYSE: GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.
Why Are We Hesitant About GGG?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
At $80.24 per share, Graco trades at 26x forward P/E. Read our free research report to see why you should think twice about including GGG in your portfolio.
Cisco (CSCO)
Trailing 12-Month GAAP Operating Margin: 22.1%
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ: CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Is CSCO Not Exciting?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- 5.8 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Cisco’s stock price of $78.06 implies a valuation ratio of 18.5x forward P/E. If you’re considering CSCO for your portfolio, see our FREE research report to learn more.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
