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. That said, here are three unprofitable companiesto steer clear of and a few better alternatives.
Teladoc (TDOC)
Trailing 12-Month GAAP Operating Margin: -10.9%
Founded to help people in rural areas get online medical consultations, Teladoc Health (NYSE: TDOC) is a telemedicine platform that facilitates remote doctor’s visits.
Why Are We Hesitant About TDOC?
- Annual revenue growth of 2.9% over the last three years was below our standards for the consumer internet sector
- Preference for prioritizing user growth over monetization has led to 7.9% annual drops in its average revenue per user
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
At $7.50 per share, Teladoc trades at 4.6x forward EV/EBITDA. Read our free research report to see why you should think twice about including TDOC in your portfolio.
MDU Resources (MDU)
Trailing 12-Month GAAP Operating Margin: -63.1%
Founded to provide electricity to towns in Minnesota, MDU Resources (NYSE: MDU) provides products and services in the utilities and construction materials industries.
Why Do We Avoid MDU?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 15.3% annually over the last five years
- Poor free cash flow margin of -0.6% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
MDU Resources trades at a stock price of $21.32. To fully understand why you should be careful with MDU, check out our full research report (it’s free for active Edge members).
HA Sustainable Infrastructure Capital (HASI)
Trailing 12-Month GAAP Operating Margin: -5.3%
With a proprietary "CarbonCount" metric that quantifies the environmental impact of each dollar invested, HA Sustainable Infrastructure Capital (NYSE: HASI) is an investment firm that finances and develops climate-positive infrastructure projects across renewable energy, energy efficiency, and ecological restoration.
Why Does HASI Fall Short?
- Low return on equity reflects management’s struggle to allocate funds effectively
- High net-debt-to-EBITDA ratio of 29× could force the company to raise capital at unfavorable terms if market conditions deteriorate
HA Sustainable Infrastructure Capital’s stock price of $34.30 implies a valuation ratio of 12.1x forward P/E. Dive into our free research report to see why there are better opportunities than HASI.
Stocks We Like More
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