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.

Finding the right unprofitable companies is difficult, which is why we started StockStory - to help you navigate the market. That said, here are three unprofitable companiesto steer clear of and a few better alternatives.

PubMatic (PUBM)

Trailing 12-Month GAAP Operating Margin: -1.3%

Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ: PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.

Why Do We Avoid PUBM?

1. Customers generally do not adopt complementary products as its 110% net revenue retention rate lags behind the industry standard
2. Projected sales decline of 8.5% for the next 12 months points to a tough demand environment ahead
3. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 5 percentage points

PubMatic’s stock price of $8.56 implies a valuation ratio of 1.5x forward price-to-sales. Check out our free in-depth research report to learn more about why PUBM doesn’t pass our bar.

fuboTV (FUBO)

Trailing 12-Month GAAP Operating Margin: -7.9%

Originally launched as a soccer streaming platform, fuboTV (NYSE: FUBO) is a video streaming service specializing in live sports, news, and entertainment content.

Why Are We Out on FUBO?

1. Number of domestic subscribers has disappointed over the past two years, indicating weak demand for its offerings
2. Historical operating margin losses point to an inefficient cost structure
3. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 6.5 percentage points over the next year

fuboTV is trading at $4.19 per share, or 90.7x forward P/E. Dive into our free research report to see why there are better opportunities than FUBO.

Icahn Enterprises (IEP)

Trailing 12-Month GAAP Operating Margin: -4.7%

Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.

Why Are We Cautious About IEP?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 9.8% annually over the last two years
2. High input costs result in an inferior gross margin of 8.5% that must be offset through higher volumes
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

At $8.31 per share, Icahn Enterprises trades at 0.4x forward price-to-sales. To fully understand why you should be careful with IEP, check out our full research report (it’s free).

Stocks We Like More

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