Unprofitable companies can burn through cash quickly, leaving investors exposed if they fail to turn things around. Without a clear path to profitability, these businesses risk running out of capital or relying on dilutive fundraising.
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 companiesthat don’t make the cut and some better opportunities instead.
Domo (DOMO)
Trailing 12-Month GAAP Operating Margin: -14.1%
Named for the Japanese word meaning "thank you very much," Domo (NASDAQ: DOMO) provides a cloud-based business intelligence platform that connects people with real-time data and insights across organizations.
Why Do We Avoid DOMO?
- Customers had second thoughts about committing to its platform over the last year as its billings averaged 1.1% declines
- Sales are projected to be flat over the next 12 months and imply weak demand
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
Domo is trading at $13.22 per share, or 1.7x forward price-to-sales. To fully understand why you should be careful with DOMO, check out our full research report (it’s free for active Edge members).
Teleflex (TFX)
Trailing 12-Month GAAP Operating Margin: -7.5%
With a portfolio spanning from vascular access catheters to minimally invasive surgical tools, Teleflex (NYSE: TFX) designs, manufactures, and supplies single-use medical devices used in critical care and surgical procedures across hospitals worldwide.
Why Is TFX Not Exciting?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 12.1 percentage points
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Teleflex’s stock price of $112.26 implies a valuation ratio of 7.6x forward P/E. Check out our free in-depth research report to learn more about why TFX doesn’t pass our bar.
Viatris (VTRS)
Trailing 12-Month GAAP Operating Margin: -18.8%
Created through the 2020 merger of Mylan and Pfizer's Upjohn division, Viatris (NASDAQ: VTRS) is a healthcare company that develops, manufactures, and distributes branded and generic medicines across more than 165 countries worldwide.
Why Should You Sell VTRS?
- Annual sales declines of 4.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 13.1% annually
- Negative returns on capital show that some of its growth strategies have backfired, and its falling returns suggest its earlier profit pools are drying up
At $11.13 per share, Viatris trades at 4.7x forward P/E. Dive into our free research report to see why there are better opportunities than VTRS.
Stocks We Like More
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