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.
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 companiesthat don’t make the cut and some better opportunities instead.
Asure Software (ASUR)
Trailing 12-Month GAAP Operating Margin: -10.2%
Operating in the often-overlooked smaller metropolitan markets where HR expertise can be scarce, Asure Software (NASDAQ: ASUR) provides cloud-based human capital management software and services that help small and medium-sized businesses manage payroll, taxes, time tracking, and HR compliance.
Why Does ASUR Worry Us?
- Revenue increased by 14.3% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 7.1% underwhelmed
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 3.2 percentage points
Asure Software is trading at $8.41 per share, or 1.5x forward price-to-sales. Read our free research report to see why you should think twice about including ASUR in your portfolio.
Clover Health (CLOV)
Trailing 12-Month GAAP Operating Margin: -2.6%
Founded in 2014 to improve healthcare for America's seniors through technology, Clover Health (NASDAQ: CLOV) provides Medicare Advantage plans for seniors with a focus on affordable care and uses its proprietary Clover Assistant software to help physicians manage patient care.
Why Do We Think Twice About CLOV?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 18.1% annually over the last two years
- Revenue base of $1.61 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Cash-burning history makes us doubt the long-term viability of its business model
At $2.62 per share, Clover Health trades at 18.6x forward P/E. To fully understand why you should be careful with CLOV, check out our full research report (it’s free).
PAR Technology (PAR)
Trailing 12-Month GAAP Operating Margin: -15.5%
Originally founded in 1968 as a defense contractor for the U.S. government, PAR Technology (NYSE: PAR) provides cloud-based software, payment processing, and hardware solutions that help restaurants manage everything from point-of-sale to customer loyalty programs.
Why Is PAR Not Exciting?
- Negative free cash flow raises questions about the return timeline for its investments
- Negative returns on capital show that some of its growth strategies have backfired
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
PAR Technology’s stock price of $52.25 implies a valuation ratio of 138.4x forward P/E. Dive into our free research report to see why there are better opportunities than PAR.
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