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. That said, here are three unprofitable companiesthat don’t make the cut and some better opportunities instead.

Flywire (FLYW)

Trailing 12-Month GAAP Operating Margin: -2.4%

Originally created to process international tuition payments for universities, Flywire (NASDAQ: FLYW) is a cross border payments processor and software platform focusing on complex, high-value transactions like education, healthcare and B2B payments.

Why Do We Think Twice About FLYW?

1. Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 63.6%
2. Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
3. Rapid expansion strategy came at the expense of operating margin profitability

Flywire’s stock price of $11.89 implies a valuation ratio of 2.4x forward price-to-sales. If you’re considering FLYW for your portfolio, see our FREE research report to learn more.

Chegg (CHGG)

Trailing 12-Month GAAP Operating Margin: -135%

Started as a physical textbook rental service, Chegg (NYSE: CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.

Why Do We Avoid CHGG?

1. Services Subscribers have declined by 13.4% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
2. EBITDA profits fell over the last few years as its sales dropped and it struggled to adjust its fixed costs
3. Sales were less profitable over the last three years as its earnings per share fell by 30.8% annually, worse than its revenue declines

Chegg is trading at $1.50 per share, or 2.5x forward EV/EBITDA. Read our free research report to see why you should think twice about including CHGG in your portfolio.

Icahn Enterprises (IEP)

Trailing 12-Month GAAP Operating Margin: -6.6%

Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.

Why Are We Cautious About IEP?

1. Annual sales declines of 14.1% for the past two years show its products and services struggled to connect with the market during this cycle
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. Negative earnings profile makes it challenging to secure favorable financing terms from lenders

At $9.19 per share, Icahn Enterprises trades at 0.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than IEP.

Stocks We Like More

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