Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 that don’t make the cut and some better opportunities instead.

Apogee (APOG)

Trailing 12-Month GAAP Operating Margin: 8.2%

Involved in the design of the Apple Store on Fifth Avenue in New York City, Apogee (NASDAQ: APOG) sells architectural products and services such as high-performance glass for commercial buildings.

Why Do We Avoid APOG?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.4% annually over the last two years
2. Flat earnings per share over the last two years lagged its peers
3. 3.4 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

Apogee is trading at $43.27 per share, or 10.4x forward P/E. Check out our free in-depth research report to learn more about why APOG doesn’t pass our bar.

GATX (GATX)

Trailing 12-Month GAAP Operating Margin: 30.5%

Originally founded to ship beer, GATX (NYSE: GATX) provides leasing and management services for railcars and other transportation assets globally.

Why Are We Wary of GATX?

1. Sluggish trends in its active railcars suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Free cash flow margin shrank by 32.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. 9× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $159.23 per share, GATX trades at 17.6x forward P/E. Read our free research report to see why you should think twice about including GATX in your portfolio.

Prudential (PRU)

Trailing 12-Month GAAP Operating Margin: 4.6%

Recognized by its iconic Rock of Gibraltar logo symbolizing strength and stability since 1896, Prudential Financial (NYSE: PRU) provides life insurance, annuities, retirement solutions, investment management, and other financial services to individual and institutional customers globally.

Why Do We Steer Clear of PRU?

1. Insurance products are facing significant market challenges during this cycle as net premiums earned has declined by 4.6% annually over the last two years
2. Projected sales decline of 4.3% over the next 12 months indicates demand will continue deteriorating
3. Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 11.3% annually over the last five years

Prudential’s stock price of $109.08 implies a valuation ratio of 1.2x forward P/B. To fully understand why you should be careful with PRU, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

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