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.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.
LiveRamp (RAMP)
Trailing 12-Month GAAP Operating Margin: 2.3%
Serving as the digital middleman in an increasingly privacy-conscious world, LiveRamp (NYSE:RAMP) provides technology that helps companies securely share and connect their customer data with trusted partners while maintaining privacy compliance.
Why Are We Cautious About RAMP?
- ARR growth averaged a weak 8.9% over the last year, suggesting that competition is pulling some attention away from its software
- Estimated sales growth of 7.8% for the next 12 months implies demand will slow from its two-year trend
- Operating margin improvement of 1.8 percentage points over the last year demonstrates its ability to scale efficiently
At $27.22 per share, LiveRamp trades at 2.2x forward price-to-sales. Check out our free in-depth research report to learn more about why RAMP doesn’t pass our bar.
Laureate Education (LAUR)
Trailing 12-Month GAAP Operating Margin: 24.2%
Founded in 1998 by Douglas L. Becker and based in Miami, Laureate Education (NASDAQ:LAUR) is a global network of higher education institutions.
Why Are We Hesitant About LAUR?
- Demand for its offerings was relatively low as its number of enrolled students has underwhelmed
- Earnings per share fell by 9.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- ROIC of 9.3% reflects management’s challenges in identifying attractive investment opportunities
Laureate Education is trading at $29.22 per share, or 15.1x forward P/E. To fully understand why you should be careful with LAUR, check out our full research report (it’s free for active Edge members).
EPAM (EPAM)
Trailing 12-Month GAAP Operating Margin: 10.6%
Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE:EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.
Why Does EPAM Fall Short?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
- Eroding returns on capital suggest its historical profit centers are aging
EPAM’s stock price of $141.75 implies a valuation ratio of 12.3x forward P/E. Read our free research report to see why you should think twice about including EPAM in your portfolio.
Stocks We Like More
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