Unprofitable companies face headwinds as they struggle to keep operating expenses under control. Some may be investing heavily, but the majority fail to convert spending into sustainable growth.
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.
Stitch Fix (SFIX)
Trailing 12-Month GAAP Operating Margin: -3.1%
One of the original subscription box companies, Stitch Fix (NASDAQ: SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Why Do We Avoid SFIX?
- Number of active clients has disappointed over the past two years, indicating weak demand for its offerings
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Stitch Fix’s stock price of $4.50 implies a valuation ratio of 16.4x forward EV-to-EBITDA. To fully understand why you should be careful with SFIX, check out our full research report (it’s free for active Edge members).
Zevia (ZVIA)
Trailing 12-Month GAAP Operating Margin: -10.5%
With a primary focus on soda but also a presence in energy drinks and teas, Zevia (NYSE: ZVIA) is a better-for-you beverage company.
Why Are We Cautious About ZVIA?
- Sales were flat over the last three years, indicating it’s failed to expand its business
- Historical operating margin losses point to an inefficient cost structure
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
Zevia is trading at $2.43 per share, or 1x forward price-to-sales. If you’re considering ZVIA for your portfolio, see our FREE research report to learn more.
iRhythm (IRTC)
Trailing 12-Month GAAP Operating Margin: -16.1%
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ: IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Is IRTC Not Exciting?
- Modest revenue base of $657.2 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Cash-burning history makes us doubt the long-term viability of its business model
- High net-debt-to-EBITDA ratio of 15× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $183.04 per share, iRhythm trades at 81.9x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why IRTC doesn’t pass our bar.
Stocks We Like More
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