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.
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 companiesthat don’t make the cut and some better opportunities instead.
Unity (U)
Trailing 12-Month GAAP Operating Margin: -36.5%
Powering over half of the world's mobile games and expanding into industries from automotive to architecture, Unity (NYSE: U) provides software tools and services that allow developers to create, run, and monetize interactive 2D and 3D content across multiple platforms.
Why Is U Risky?
- Products, pricing, or go-to-market strategy may need some adjustments as its 8.7% average billings growth over the last year was weak
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 14.1%
- Operating margin declined by 8.1 percentage points over the last year as its sales cratered
Unity’s stock price of $29 implies a valuation ratio of 5.7x forward price-to-sales. To fully understand why you should be careful with U, check out our full research report (it’s free).
NN (NNBR)
Trailing 12-Month GAAP Operating Margin: -6.6%
Formerly known as Nuturn, NN (NASDAQ: NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.
Why Do We Think NNBR Will Underperform?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Negative free cash flow raises questions about the return timeline for its investments
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $3.53 per share, NN trades at 33.6x forward P/E. Check out our free in-depth research report to learn more about why NNBR doesn’t pass our bar.
agilon health (AGL)
Trailing 12-Month GAAP Operating Margin: -7.5%
Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE: AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.
Why Is AGL Not Exciting?
- Weak customer trends over the past two years suggest it may need to improve its products, pricing, or go-to-market strategy
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- Cash-burning history makes us doubt the long-term viability of its business model
agilon health is trading at $97.50 per share, or 79.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than AGL.
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