Unprofitable companies face headwinds as they struggle to keep operating expenses under control. Some may be investing heavily, but the majority fail to convert spending into sustainable growth.
A lack of profits can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here are three unprofitable companiesthat don’t make the cut and some better opportunities instead.
Domo (DOMO)
Trailing 12-Month GAAP Operating Margin: -18.7%
Founded by Josh James after selling his former business Omniture to Adobe, Domo (NASDAQ:DOMO) provides business intelligence software that allows managers to access and visualize critical business metrics in real-time, using their smartphones.
Why Should You Dump DOMO?
- Offerings couldn’t generate interest over the last year as its billings have averaged 3.5% declines
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Domo’s stock price of $7.55 implies a valuation ratio of 0.9x forward price-to-sales. Read our free research report to see why you should think twice about including DOMO in your portfolio.
ThredUp (TDUP)
Trailing 12-Month GAAP Operating Margin: -15.6%
Founded to revolutionize thrifting, ThredUp (NASDAQ:TDUP) is a leading online fashion resale marketplace offering a wide selection of gently-used clothing and accessories.
Why Is TDUP Risky?
- Sluggish trends in its orders suggest customers aren’t adopting its solutions as quickly as the company hoped
- Historical operating losses point to an inefficient cost structure
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $4.26 per share, ThredUp trades at 64.1x forward EV-to-EBITDA. To fully understand why you should be careful with TDUP, check out our full research report (it’s free).
Myriad Genetics (MYGN)
Trailing 12-Month GAAP Operating Margin: -14.7%
Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ:MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.
Why Do We Steer Clear of MYGN?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Earnings per share fell by 34.9% annually over the last five years while its revenue was flat, partly because it diluted shareholders
- Push for growth has led to negative returns on capital, signaling value destruction
Myriad Genetics is trading at $7.39 per share, or 136.1x forward P/E. Check out our free in-depth research report to learn more about why MYGN doesn’t pass our bar.
Stocks We Like More
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