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.

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 are three unprofitable companiesthat don’t make the cut and some better opportunities instead.

Skillz (SKLZ)

Trailing 12-Month GAAP Operating Margin: -63.8%

Taking a new twist at video gaming, Skillz (NYSE: SKLZ) offers developers a platform to create and distribute mobile games where players can pay fees to compete for cash prizes.

Why Are We Out on SKLZ?

1. Intense competition is diverting traffic from its platform as its paying monthly active users fell by 15% annually
2. Persistent EBITDA margin losses suggest the business manages its expenses poorly
3. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

Skillz is trading at $6.04 per share, or 0.9x forward price-to-gross profit. Dive into our free research report to see why there are better opportunities than SKLZ.

Matrix Service (MTRX)

Trailing 12-Month GAAP Operating Margin: -2.8%

Founded in Oklahoma, Matrix Service (NASDAQ: MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.

Why Does MTRX Worry Us?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.9% annually over the last five years
2. Gross margin of 3.8% is below its competitors, leaving less money to invest in areas like marketing and R&D
3. Performance over the past five years was negatively impacted by new share issuances as its earnings per share dropped by 66.3% annually, worse than its revenue

At $11.20 per share, Matrix Service trades at 15.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including MTRX in your portfolio.

Azenta (AZTA)

Trailing 12-Month GAAP Operating Margin: -5.3%

Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ: AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.

Why Do We Pass on AZTA?

1. Annual sales declines of 7.2% for the past five years show its products and services struggled to connect with the market during this cycle
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 18.7% annually, worse than its revenue
3. 22.5 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

Azenta’s stock price of $29.38 implies a valuation ratio of 40x forward P/E. If you’re considering AZTA for your portfolio, see our FREE research report to learn more.

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