Running at a loss can be a red flag. Many of these businesses face mounting challenges as competition increases and funding becomes harder to secure.
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.
Upland Software (UPLD)
Trailing 12-Month GAAP Operating Margin: -5.3%
Operating under the mantra "land and expand," Upland Software (NASDAQ: UPLD) provides cloud-based applications that help organizations manage projects, workflows, and digital transformation across various business functions.
Why Do We Think Twice About UPLD?
- Sales stagnated over the last five years and signal the need for new growth strategies
- Sales are projected to tank by 19.2% over the next 12 months as its demand continues evaporating
- Historical operating margin losses point to an inefficient cost structure
At $2.43 per share, Upland Software trades at 0.3x forward price-to-sales. Read our free research report to see why you should think twice about including UPLD in your portfolio.
Driven Brands (DRVN)
Trailing 12-Month GAAP Operating Margin: -8.1%
With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ: DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.
Why Is DRVN Risky?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Driven Brands’s stock price of $15.40 implies a valuation ratio of 11.7x forward P/E. Dive into our free research report to see why there are better opportunities than DRVN.
Lucid (LCID)
Trailing 12-Month GAAP Operating Margin: -323%
Founded by a former Tesla Vice President, Lucid Group (NASDAQ: LCID) designs, manufactures, and sells luxury electric vehicles with long-range capabilities.
Why Are We Cautious About LCID?
- Negative 155% gross margin means it loses money on every sale and must pivot or scale quickly to survive
- Cash-burning history makes us doubt the long-term viability of its business model
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Lucid is trading at $21.37 per share, or 33.1x forward price-to-sales. Check out our free in-depth research report to learn more about why LCID doesn’t pass our bar.
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