C.H. Robinson Worldwide has had an impressive run over the past six months as its shares have beaten the S&P 500 by 6.1%. The stock now trades at $205.75, marking a 17.5% gain. This run-up might have investors contemplating their next move.

Is there a buying opportunity in C.H. Robinson Worldwide, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is C.H. Robinson Worldwide Not Exciting?

We’re glad investors have benefited from the price increase, but we don’t have much confidence in C.H. Robinson Worldwide. Here are three reasons you should be careful with CHRW, plus one stock we’d rather own.

1. Revenue Spiraling Downwards

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, C.H. Robinson Worldwide’s demand was weak and its revenue declined by 1.2% per year. This was below our standards and signals it’s a lower quality business.

2. Low Gross Margin Reveals Weak Structural Profitability

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

C.H. Robinson Worldwide has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 7.5% gross margin over the last five years. That means C.H. Robinson Worldwide paid its suppliers a lot of money ($92.53 for every $100 in revenue) to run its business.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

Unfortunately, C.H. Robinson Worldwide’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

C.H. Robinson Worldwide isn’t a terrible business, but it doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at 30.6× forward P/E (or $205.75 per share). This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere. We’d recommend looking at a dominant aerospace business that has perfected its M&A strategy.

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