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. Keeping that in mind, here are three unprofitable companiesto steer clear of and a few better alternatives.
Asure Software (ASUR)
Trailing 12-Month GAAP Operating Margin: -10.2%
Operating in the often-overlooked smaller metropolitan markets where HR expertise can be scarce, Asure Software (NASDAQ: ASUR) provides cloud-based human capital management software and services that help small and medium-sized businesses manage payroll, taxes, time tracking, and HR compliance.
Why Do We Think ASUR Will Underperform?
- Annual revenue growth of 4.4% over the last two years was well below our standards for the software sector
- Products, pricing, or go-to-market strategy may need some adjustments as its 7.1% average billings growth over the last year was weak
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 3.2 percentage points
At $8.51 per share, Asure Software trades at 1.6x forward price-to-sales. If you’re considering ASUR for your portfolio, see our FREE research report to learn more.
Cable One (CABO)
Trailing 12-Month GAAP Operating Margin: -11.8%
Founded in 1986, Cable One (NYSE: CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.
Why Are We Out on CABO?
- Sluggish trends in its residential data subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Sales are projected to tank by 3.2% over the next 12 months as its demand continues evaporating
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Cable One is trading at $161.06 per share, or 4.4x forward P/E. Dive into our free research report to see why there are better opportunities than CABO.
Perma-Fix (PESI)
Trailing 12-Month GAAP Operating Margin: -21.3%
Tackling hazardous waste challenges since 1990, Perma-Fix (NASDAQ: PESI) provides environmental waste treatment services.
Why Do We Steer Clear of PESI?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 8.1% annually over the last five years
- 31.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Perma-Fix’s stock price of $14.50 implies a valuation ratio of 3.2x forward price-to-sales. Check out our free in-depth research report to learn more about why PESI doesn’t pass our bar.
Stocks We Like More
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