Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

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 avoid and some better opportunities instead.

Macy's (M)

Trailing 12-Month GAAP Operating Margin: 3.5%

With a storied history that began with its 1858 founding, Macy’s (NYSE: M) is a department store chain that sells clothing, cosmetics, accessories, and home goods.

Why Should You Dump M?

1. Store closures and poor same-store sales reveal weak demand and a push toward operational efficiency
2. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
3. Earnings per share have dipped by 22.4% annually over the past three years, which is concerning because stock prices follow EPS over the long term

Macy's is trading at $17.99 per share, or 8.2x forward P/E. Check out our free in-depth research report to learn more about why M doesn’t pass our bar.

Republic Services (RSG)

Trailing 12-Month GAAP Operating Margin: 19.9%

Processing several million tons of recyclables annually, Republic (NYSE: RSG) provides waste management services for residences, companies, and municipalities.

Why Does RSG Give Us Pause?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 5.3% for the last two years
2. Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
3. Estimated sales growth of 3.2% for the next 12 months implies demand will slow from its two-year trend

Republic Services’s stock price of $223.11 implies a valuation ratio of 31.8x forward P/E. Dive into our free research report to see why there are better opportunities than RSG.

ICF International (ICFI)

Trailing 12-Month GAAP Operating Margin: 7.8%

Operating at the intersection of policy, technology, and implementation for over five decades, ICF International (NASDAQ: ICFI) provides professional consulting services and technology solutions to government agencies and commercial clients across energy, health, environment, and security sectors.

Why Should You Sell ICFI?

1. Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 7.4% declines over the past two years
2. Anticipated sales growth of 2.2% for the next year implies demand will be shaky
3. Earnings per share lagged its peers over the last two years as they only grew by 2% annually

At $72.89 per share, ICF International trades at 10.7x forward P/E. Read our free research report to see why you should think twice about including ICFI in your portfolio.

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