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.
Unprofitable companies face an uphill battle, but not all are created equal. Luckily for you, StockStory is here to separate the promising ones from the weak. Keeping that in mind, here is one unprofitable company that could turn today’s losses into long-term gains and two that could struggle to survive.
Two Stocks to Sell:
Flywire (FLYW)
Trailing 12-Month GAAP Operating Margin: -1%
Initially created to solve the challenges of international student tuition payments, Flywire (NASDAQ: FLYW) provides specialized payment processing and software solutions that help educational institutions, healthcare systems, travel companies, and businesses manage complex payments.
Why Does FLYW Fall Short?
- High servicing costs result in a relatively inferior gross margin of 62.9% that must be offset through increased usage
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Operating margin improvement of 3.5 percentage points over the last year demonstrates its ability to scale efficiently
At $13.56 per share, Flywire trades at 2.6x forward price-to-sales. Read our free research report to see why you should think twice about including FLYW in your portfolio.
Affirm (AFRM)
Trailing 12-Month GAAP Operating Margin: -2.7%
Founded by PayPal co-founder Max Levchin with a mission to create honest financial products, Affirm (NASDAQ: AFRM) provides a payment network that allows consumers to make purchases and pay for them over time with transparent, flexible installment loans.
Why Do We Think Twice About AFRM?
- Negative return on equity shows that some of its growth strategies have backfired
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Affirm is trading at $90.28 per share, or 38.1x forward P/E. Check out our free in-depth research report to learn more about why AFRM doesn’t pass our bar.
One Stock to Watch:
Olo (OLO)
Trailing 12-Month GAAP Operating Margin: -5.5%
Processing over two million orders daily across 80,000 restaurant locations nationwide, Olo (NYSE: OLO) provides an enterprise-grade SaaS platform that powers digital ordering, delivery, and payment systems for restaurant brands across the United States.
Why Are We Fans of OLO?
- Billings growth has averaged 23.4% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Estimated revenue growth of 17.1% for the next 12 months implies its momentum over the last two years will continue
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
Olo’s stock price of $10.26 implies a valuation ratio of 5.1x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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