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. Keeping that in mind, here are three unprofitable companiesto steer clear of and a few better alternatives.

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 Do We Think ASUR Will Underperform?

1. Annual revenue growth of 4.4% over the last two years was well below our standards for the software sector
2. Products, pricing, or go-to-market strategy may need some adjustments as its 7.1% average billings growth over the last year was weak
3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 3.2 percentage points

At $8.51 per share, Asure Software trades at 1.6x forward price-to-sales. If you’re considering ASUR for your portfolio, see our FREE research report to learn more.

Cable One (CABO)

Trailing 12-Month GAAP Operating Margin: -11.8%

Founded in 1986, Cable One (NYSE: CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.

Why Are We Out on CABO?

1. Sluggish trends in its residential data subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Sales are projected to tank by 3.2% over the next 12 months as its demand continues evaporating
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Cable One is trading at $161.06 per share, or 4.4x forward P/E. Dive into our free research report to see why there are better opportunities than CABO.

Perma-Fix (PESI)

Trailing 12-Month GAAP Operating Margin: -21.3%

Tackling hazardous waste challenges since 1990, Perma-Fix (NASDAQ: PESI) provides environmental waste treatment services.

Why Do We Steer Clear of PESI?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 8.1% annually over the last five years
2. 31.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Perma-Fix’s stock price of $14.50 implies a valuation ratio of 3.2x forward price-to-sales. Check out our free in-depth research report to learn more about why PESI doesn’t pass our bar.

Stocks We Like More

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