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.
Unprofitable companies face an uphill battle, but not all are created equal. Luckily for you, StockStory is here to separate the promising ones from the weak. That said, here are three unprofitable companiesthat don’t make the cut and some better opportunities instead.
Mercury Systems (MRCY)
Trailing 12-Month GAAP Operating Margin: 1%
Founded in 1981, Mercury Systems (NASDAQ: MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Why Are We Hesitant About MRCY?
- Sales trends were unexciting over the last five years as its 1.7% annual growth was below the typical industrials company
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Earnings per share fell by 13.6% annually over the last five years while its revenue grew, partly because it diluted shareholders
Mercury Systems is trading at $90.33 per share, or 64.9x forward P/E. To fully understand why you should be careful with MRCY, check out our full research report (it’s free).
NN (NNBR)
Trailing 12-Month GAAP Operating Margin: -6.6%
Formerly known as Nuturn, NN (NASDAQ: NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.
Why Do We Steer Clear of NNBR?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $2.81 per share, NN trades at 30.7x forward P/E. Dive into our free research report to see why there are better opportunities than NNBR.
Viatris (VTRS)
Trailing 12-Month GAAP Operating Margin: 1%
Created through the 2020 merger of Mylan and Pfizer's Upjohn division, Viatris (NASDAQ: VTRS) is a healthcare company that develops, manufactures, and distributes branded and generic medicines across more than 165 countries worldwide.
Why Are We Out on VTRS?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.6% annually over the last two years
- Earnings per share fell by 9.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Push for growth has led to negative returns on capital, signaling value destruction, and its decreasing returns suggest its historical profit centers are aging
Viatris’s stock price of $16.98 implies a valuation ratio of 1.4x forward price-to-sales. Read our free research report to see why you should think twice about including VTRS in your portfolio.
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