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 companiesthat don’t make the cut and some better opportunities instead.
PlayStudios (MYPS)
Trailing 12-Month GAAP Operating Margin: -14.8%
Founded by a team of former gaming industry executives, PlayStudios (NASDAQ: MYPS) offers free-to-play digital casino games.
Why Should You Sell MYPS?
- Number of daily active users has disappointed over the past two years, indicating weak demand for its offerings
- Historically negative EPS is a worrisome sign for conservative investors and obscures its long-term earnings potential
- Low free cash flow margin of 14.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
PlayStudios is trading at $0.65 per share, or 0.3x forward price-to-sales. If you’re considering MYPS for your portfolio, see our FREE research report to learn more.
Driven Brands (DRVN)
Trailing 12-Month GAAP Operating Margin: -9.4%
With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ: DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.
Why Does DRVN Worry Us?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its stores
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
Driven Brands’s stock price of $14.82 implies a valuation ratio of 10.8x forward P/E. Dive into our free research report to see why there are better opportunities than DRVN.
EVgo (EVGO)
Trailing 12-Month GAAP Operating Margin: -40%
Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ: EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.
Why Do We Think Twice About EVGO?
- Persistent operating margin losses suggest the business manages its expenses poorly
- Negative free cash flow raises questions about the return timeline for its investments
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $2.91 per share, EVgo trades at 10.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including EVGO in your portfolio.
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