3 Profitable Stocks with Open Questions
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. Keeping that in mind, here are three profitable companies to steer clear of and a few better alternatives.
PepsiCo (PEP)
Trailing 12-Month GAAP Operating Margin: 14.8%
With a history that goes back more than a century, PepsiCo (NASDAQ:PEP) is a household name in food and beverages today and best known for its flagship soda.
Why Does PEP Worry Us?
- Falling unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Estimated sales growth of 3.3% for the next 12 months is soft and implies weaker demand
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 5% annually
At $134.44 per share, PepsiCo trades at 15.6x forward P/E. If you’re considering PEP for your portfolio, see our FREE research report to learn more.
Harley-Davidson (HOG)
Trailing 12-Month GAAP Operating Margin: 5%
Founded in 1903, Harley-Davidson (NYSE:HOG) is an American motorcycle manufacturer known for its heavyweight motorcycles designed for cruising on highways.
Why Is HOG Risky?
- Demand for its offerings was relatively low as its number of motorcycles sold has underwhelmed
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 7.9% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Harley-Davidson is trading at $26.98 per share, or 19.3x forward P/E. To fully understand why you should be careful with HOG, check out our full research report (it’s free).
Green Plains (GPRE)
Trailing 12-Month GAAP Operating Margin: 7.4%
Operating one of North America's largest ethanol platforms with capacity to process 310 million bushels of corn annually, Green Plains (NASDAQ:GPRE) operates ten biorefineries that convert corn into ethanol for fuel, distillers grains for animal feed, and renewable corn oil.
Why Should You Sell GPRE?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.5% annually over the last five years
- Costly operations and weak unit economics result in an inferior gross margin of 5.8% that must be offset through higher production volumes
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
Green Plains’s stock price of $15.23 implies a valuation ratio of 8.6x forward P/E. Check out our free in-depth research report to learn more about why GPRE doesn’t pass our bar.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.