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.
Bandwidth (BAND)
Trailing 12-Month GAAP Operating Margin: -1.8%
Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ: BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.
Why Do We Steer Clear of BAND?
- 11.9% annual revenue growth over the last two years was slower than its software peers
- Gross margin of 37.2% reflects its high servicing costs
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
Bandwidth is trading at $54.03 per share, or 1.9x forward price-to-sales. If you’re considering BAND for your portfolio, see our FREE research report to learn more.
Sweetgreen (SG)
Trailing 12-Month GAAP Operating Margin: -21.4%
Founded in 2007 by three Georgetown University alum, Sweetgreen (NYSE: SG) is a casual quick service chain known for its healthy salads and bowls.
Why Do We Avoid SG?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Long-term business health is up for debate as its cash burn has increased over the last year
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Sweetgreen’s stock price of $6.04 implies a valuation ratio of 1x forward price-to-sales. Read our free research report to see why you should think twice about including SG in your portfolio.
Clean Energy Fuels (CLNE)
Trailing 12-Month GAAP Operating Margin: -7.3%
Operating the largest network of natural gas fueling stations in North America with over 600 locations, Clean Energy Fuels (NASDAQ: CLNE) supplies renewable natural gas and conventional natural gas as fuel for commercial vehicle fleets.
Why Do We Pass on CLNE?
- Subscale operations are evident in its revenue base of $442.4 million, meaning it has fewer distribution channels than its larger rivals
- Gross margin of 26.8% reflects its high production costs and unfavorable asset base
- Poor free cash flow margin of 2.3% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $1.78 per share, Clean Energy Fuels trades at 7.2x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why CLNE doesn’t pass our bar.
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