Unprofitable companies can burn through cash quickly, leaving investors exposed if they fail to turn things around. Without a clear path to profitability, these businesses risk running out of capital or relying on dilutive fundraising.

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 steer clear of and a few better alternatives.

Opendoor (OPEN)

Trailing 12-Month GAAP Operating Margin: -4.4%

Founded by real estate guru Eric Wu, Opendoor (NASDAQ: OPEN) offers a technology-driven, convenient, and streamlined process to buy and sell homes.

Why Do We Pass on OPEN?

1. Demand for its offerings was relatively low as its number of homes purchased has underwhelmed
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes

At $3.22 per share, Opendoor trades at 0.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than OPEN.

Sunrun (RUN)

Trailing 12-Month GAAP Operating Margin: -170%

Helping homeowners use solar energy to power their homes, Sunrun (NASDAQ: RUN) provides residential solar electricity, specializing in panel installation and leasing services.

Why Are We Cautious About RUN?

1. Sales tumbled by 6.2% annually over the last two years, showing market trends are working against its favor during this cycle
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Sunrun’s stock price of $13.97 implies a valuation ratio of 19.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including RUN in your portfolio.

Exact Sciences (EXAS)

Trailing 12-Month GAAP Operating Margin: -34.5%

With a mission to detect cancer earlier when it's more treatable, Exact Sciences (NASDAQ: EXAS) develops and markets cancer screening and diagnostic tests, including its flagship Cologuard stool-based colorectal cancer screening test.

Why Are We Hesitant About EXAS?

1. Cash burn makes us question whether it can achieve sustainable long-term growth
2. Negative returns on capital show that some of its growth strategies have backfired

Exact Sciences is trading at $45.68 per share, or 62x forward P/E. If you’re considering EXAS for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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