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.
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.
UiPath (PATH)
Trailing 12-Month GAAP Operating Margin: -11.4%
Started in 2005 in Romania as a tech outsourcing company, UiPath (NYSE: PATH) makes software that helps companies automate repetitive computer tasks.
Why Are We Hesitant About PATH?
- Offerings struggled to generate meaningful interest as its average billings growth of 5.7% over the last year did not impress
- Estimated sales growth of 6.4% for the next 12 months implies demand will slow from its three-year trend
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
At $10.22 per share, UiPath trades at 3.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PATH.
Peloton (PTON)
Trailing 12-Month GAAP Operating Margin: -9.3%
Started as a Kickstarter campaign, Peloton (NASDAQ: PTON) is a fitness technology company known for its at-home exercise equipment and interactive online workout classes.
Why Is PTON Risky?
- Demand for its offerings was relatively low as its number of connected fitness subscribers has underwhelmed
- Historical operating losses point to an inefficient cost structure
- Cash burn makes us question whether it can achieve sustainable long-term growth
Peloton is trading at $5.27 per share, or 7.8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including PTON in your portfolio.
PlayStudios (MYPS)
Trailing 12-Month GAAP Operating Margin: -11.4%
Founded by a team of former gaming industry executives, PlayStudios (NASDAQ: MYPS) offers free-to-play digital casino games.
Why Should You Dump MYPS?
- Flat sales over the last two years suggest it must innovate and find new ways to grow
- Persistent operating losses suggest the business manages its expenses poorly
- Performance over the past four years shows its incremental sales were much less profitable, as its earnings per share fell by 41.4% annually
PlayStudios’s stock price of $1.23 implies a valuation ratio of 2.5x forward EV-to-EBITDA. To fully understand why you should be careful with MYPS, check out our full research report (it’s free).
Stocks We Like More
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Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
