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 are three unprofitable companiesto avoid and some better opportunities instead.
Health Catalyst (HCAT)
Trailing 12-Month GAAP Operating Margin: -21.6%
Founded by healthcare professionals Tom Burton and Steve Barlow in 2008, Health Catalyst (NASDAQ: HCAT) provides data and analytics technology to healthcare organizations, enabling them to improve care and lower costs.
Why Does HCAT Fall Short?
- 7% annual revenue growth over the last three years was slower than its software peers
- Gross margin of 45.9% reflects its high servicing costs
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
Health Catalyst is trading at $3.75 per share, or 0.7x forward price-to-sales. If you’re considering HCAT for your portfolio, see our FREE research report to learn more.
Upland (UPLD)
Trailing 12-Month GAAP Operating Margin: -4.4%
Founder Jack McDonald’s second software rollup, Upland Software (NASDAQ: UPLD) is a one stop shop for sales and marketing software, project management, HR, and contact center services for small and medium sized businesses.
Why Are We Out on UPLD?
- Sales tumbled by 4.4% annually over the last three years, showing industry trends like AI are working against its favor
- Forecasted revenue decline of 22.7% for the upcoming 12 months implies demand will fall even further
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
Upland’s stock price of $1.94 implies a valuation ratio of 0.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than UPLD.
QuidelOrtho (QDEL)
Trailing 12-Month GAAP Operating Margin: -6.2%
Born from the 2022 merger of Quidel and Ortho Clinical Diagnostics, QuidelOrtho (NASDAQ: QDEL) develops and manufactures diagnostic testing solutions for healthcare providers, from rapid point-of-care tests to complex laboratory instruments and systems.
Why Should You Sell QDEL?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 28.6 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
At $28.02 per share, QuidelOrtho trades at 10.4x forward P/E. Read our free research report to see why you should think twice about including QDEL in your portfolio.
Stocks We Like More
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