Running at a loss can be a red flag. Many of these businesses face mounting challenges as competition increases and funding becomes harder to secure.
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 companiesthat don’t make the cut and some better opportunities instead.
Wix (WIX)
Trailing 12-Month GAAP Operating Margin: -5.1%
Powering over 263 million registered users worldwide with its AI-driven tools, Wix (NASDAQ: WIX) provides a cloud-based platform that helps individuals and businesses create and manage professional websites without requiring coding skills.
Why Are We Wary of WIX?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 13.8% underwhelmed
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 12.2 percentage points
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 10.3 percentage points
At $53 per share, Wix trades at 1.3x forward price-to-sales. Read our free research report to see why you should think twice about including WIX in your portfolio.
Alight (ALIT)
Trailing 12-Month GAAP Operating Margin: -138%
Born from a corporate spinoff in 2017 to focus on employee experience technology, Alight (NYSE: ALIT) provides human capital management solutions that help companies administer employee benefits, payroll, and workforce management systems.
Why Should You Sell ALIT?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.8% annually over the last five years
- Earnings per share have dipped by 19.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Alight’s stock price of $21.78 implies a valuation ratio of 4.2x forward P/E. If you’re considering ALIT for your portfolio, see our FREE research report to learn more.
World Kinect (WKC)
Trailing 12-Month GAAP Operating Margin: -1.4%
Serving over 150,000 customers from commercial jets to cargo ships to heating oil consumers, World Kinect (NYSE: WKC) procures and delivers fuel and energy products to airlines, shipping companies, trucking fleets, and industrial businesses worldwide.
Why Is WKC Risky?
- Costly operations and weak unit economics result in an inferior gross margin of 2.3% that must be offset through higher production volumes
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0.3% for the last five years
World Kinect is trading at $36.91 per share, or 14.5x forward P/E. To fully understand why you should be careful with WKC, check out our full research report (it’s free).
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