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.
Finding the right unprofitable companies is difficult, which is why we started StockStory - to help you navigate the market. Keeping that in mind, here are three unprofitable companiesto avoid and some better opportunities instead.
ThredUp (TDUP)
Trailing 12-Month GAAP Operating Margin: -12.6%
Founded to revolutionize thrifting, ThredUp (NASDAQ: TDUP) is a leading online fashion resale marketplace offering a wide selection of gently-used clothing and accessories.
Why Is TDUP Risky?
- Number of orders has disappointed over the past two years, indicating weak demand for its offerings
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
ThredUp is trading at $7.79 per share, or 105.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than TDUP.
Boeing (BA)
Trailing 12-Month GAAP Operating Margin: -14.6%
One of the companies that forms a duopoly in the commercial aircraft market, Boeing (NYSE: BA) develops, manufactures, and services commercial airplanes, defense products, and space systems.
Why Should You Sell BA?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $209.75 per share, Boeing trades at 29.7x forward EV-to-EBITDA. To fully understand why you should be careful with BA, check out our full research report (it’s free).
PacBio (PACB)
Trailing 12-Month GAAP Operating Margin: -539%
Pioneering what scientists call "HiFi long-read sequencing," recognized as Nature Methods' method of the year for 2022, Pacific Biosciences (NASDAQ: PACB) develops advanced DNA sequencing systems that enable scientists and researchers to analyze genomes with unprecedented accuracy and completeness.
Why Do We Steer Clear of PACB?
- Sales trends were unexciting over the last two years as its 6.6% annual growth was below the typical healthcare company
- 29.9 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
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
PacBio’s stock price of $1.28 implies a valuation ratio of 2.4x forward price-to-sales. Check out our free in-depth research report to learn more about why PACB doesn’t pass our bar.
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