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 companies to avoid and some better opportunities instead.

Conagra (CAG)

Trailing 12-Month GAAP Operating Margin: -14.4%

Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE: CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.

Why Do We Steer Clear of CAG?

1. Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
2. Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
3. Inability to adjust its cost structure while its revenue declined over the last year led to a 26.2 percentage point drop in the company’s operating margin

At $16.21 per share, Conagra trades at 10.7x forward P/E. Dive into our free research report to see why there are better opportunities than CAG.

Teleflex (TFX)

Trailing 12-Month GAAP Operating Margin: -13.4%

With a portfolio spanning from vascular access catheters to minimally invasive surgical tools, Teleflex (NYSE: TFX) designs, manufactures, and supplies single-use medical devices used in critical care and surgical procedures across hospitals worldwide.

Why Are We Out on TFX?

1. Constant currency revenue growth has disappointed over the past two years and shows demand was soft
2. Sales were less profitable over the last five years as its earnings per share fell by 6.5% annually, worse than its revenue declines
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Teleflex’s stock price of $134.76 implies a valuation ratio of 14.4x forward P/E. To fully understand why you should be careful with TFX, check out our full research report (it’s free).

Dentsply Sirona (XRAY)

Trailing 12-Month GAAP Operating Margin: -8.5%

With roots dating back to 1877 when it introduced the first dental electric drill, Dentsply Sirona (NASDAQ: XRAY) manufactures and sells professional dental equipment, technologies, and consumable products used by dentists and specialists worldwide.

Why Do We Avoid XRAY?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 13.6% annually, worse than its revenue
3. Negative returns on capital show management lost money while trying to expand the business, and its decreasing returns suggest its historical profit centers are aging

Dentsply Sirona is trading at $11.44 per share, or 7.5x forward P/E. If you’re considering XRAY for your portfolio, see our FREE research report to learn more.

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