Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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. That said, here are three profitable companies to avoid and some better opportunities instead.

Rush Enterprises (RUSHA)

Trailing 12-Month GAAP Operating Margin: 5.7%

Headquartered in Texas, Rush Enterprises (NASDAQ: RUSH.A) provides truck-related services and solutions, including sales, leasing, parts, and maintenance for commercial vehicles.

Why Does RUSHA Worry Us?

1. Flat sales over the last two years suggest it must find different ways to grow during this cycle
2. Projected sales for the next 12 months are flat and suggest demand will be subdued
3. Earnings per share have contracted by 10.6% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance

Rush Enterprises’s stock price of $53.69 implies a valuation ratio of 13.6x forward EV-to-EBITDA. To fully understand why you should be careful with RUSHA, check out our full research report (it’s free).

Manitowoc (MTW)

Trailing 12-Month GAAP Operating Margin: 2.5%

Contracted by the United States Navy during WWII, Manitowoc (NYSE: MTW) provides cranes and lifting equipment.

Why Do We Pass on MTW?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 12.5% decline in its backlog
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 17.1% annually while its revenue grew
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Manitowoc is trading at $12.05 per share, or 16.1x forward P/E. If you’re considering MTW for your portfolio, see our FREE research report to learn more.

HNI (HNI)

Trailing 12-Month GAAP Operating Margin: 9.1%

With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE: HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.

Why Does HNI Fall Short?

1. 4.9% annual revenue growth over the last five years was slower than its business services peers
2. Estimated sales growth of 3.4% for the next 12 months implies demand will slow from its two-year trend
3. Free cash flow margin dropped by 2.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $50.62 per share, HNI trades at 13.6x forward P/E. To fully understand why you should be careful with HNI, check out our full research report (it’s free).

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