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. That said, here is one unprofitable company with the potential to become an industry leader and two that may never reach the Promised Land.
Two Stocks to Sell:
Tenable (TENB)
Trailing 12-Month GAAP Operating Margin: -1.7%
Founded in 2002 by three cybersecurity veterans, Tenable (NASDAQ: TENB) provides software as a service that helps companies understand where they are exposed to cyber security risk and how to reduce it.
Why Does TENB Fall Short?
- Sales trends were unexciting over the last three years as its 16.9% annual growth was below the typical software company
- Estimated sales growth of 7.5% for the next 12 months implies demand will slow from its three-year trend
- Suboptimal cost structure is highlighted by its history of operating margin losses
Tenable’s stock price of $32.75 implies a valuation ratio of 4x forward price-to-sales. If you’re considering TENB for your portfolio, see our FREE research report to learn more.
Magnachip (MX)
Trailing 12-Month GAAP Operating Margin: -17.6%
With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE: MX) is a provider of analog and mixed-signal semiconductors.
Why Do We Steer Clear of MX?
- Annual sales declines of 18.5% for the past five years show its products and services struggled to connect with the market during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 20.8% annually, worse than its revenue declines
- Cash burn has widened over the last five years, making us question whether it can reliably generate shareholder value
At $3.85 per share, Magnachip trades at 0.7x forward price-to-sales. Read our free research report to see why you should think twice about including MX in your portfolio.
One Stock to Watch:
DraftKings (DKNG)
Trailing 12-Month GAAP Operating Margin: -10.3%
Getting its start in daily fantasy sports, DraftKings (NASDAQ: DKNG) is a digital sports entertainment and gaming company.
Why Should DKNG Be on Your Watchlist?
- Rise in monthly unique players indicates high demand for its offerings
- Notable projected revenue growth of 32.9% for the next 12 months hints at market share gains
- Earnings growth has comfortably beaten the peer group average over the last four years as its EPS has compounded at 20.4% annually
DraftKings is trading at $39.64 per share, or 24.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
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