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. Keeping that in mind, here are three unprofitable companiesto avoid and some better opportunities instead.
AMC Networks (AMCX)
Trailing 12-Month GAAP Operating Margin: 5.8%
Originally the joint-venture of four cable television companies, AMC Networks (NASDAQ: AMCX) is a broadcaster producing a diverse range of television shows and movies.
Why Is AMCX Risky?
- Sales tumbled by 3.9% annually over the last five years, showing consumer trends are working against its favor
- Free cash flow margin is forecasted to shrink by 3.2 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
AMC Networks is trading at $7.55 per share, or 4.3x forward P/E. If you’re considering AMCX for your portfolio, see our FREE research report to learn more.
Guardant Health (GH)
Trailing 12-Month GAAP Operating Margin: -49%
Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ: GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.
Why Does GH Worry Us?
- Revenue base of $902.6 million indicates it’s still subscale compared to its larger peers (though this creates opportunities to expand into untapped markets)
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
Guardant Health’s stock price of $105.22 implies a valuation ratio of 10.9x forward price-to-sales. Dive into our free research report to see why there are better opportunities than GH.
HA Sustainable Infrastructure Capital (HASI)
Trailing 12-Month GAAP Operating Margin: -5.7%
With a proprietary "CarbonCount" metric that quantifies the environmental impact of each dollar invested, HA Sustainable Infrastructure Capital (NYSE: HASI) is an investment firm that finances and develops climate-positive infrastructure projects across renewable energy, energy efficiency, and ecological restoration.
Why Are We Wary of HASI?
- ROE of 8.3% reflects management’s challenges in identifying attractive investment opportunities
- High net-debt-to-EBITDA ratio of 27× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $39.84 per share, HA Sustainable Infrastructure Capital trades at 12.2x forward P/E. Read our free research report to see why you should think twice about including HASI in your portfolio.
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