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.
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.
B&G Foods (BGS)
Trailing 12-Month GAAP Operating Margin: -10.2%
Started as a small grocery store in New York City, B&G Foods (NYSE:BGS) is an American packaged foods company with a diverse portfolio of more than 50 brands.
Why Should You Dump BGS?
- Sales tumbled by 4.5% annually over the last three years, showing consumer trends are working against its favor
- Performance over the past three years shows each sale was less profitable as its earnings per share dropped by 21.4% annually, worse than its revenue
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $4.22 per share, B&G Foods trades at 7.9x forward P/E. Read our free research report to see why you should think twice about including BGS in your portfolio.
Enovis (ENOV)
Trailing 12-Month GAAP Operating Margin: -57.6%
With a focus on helping patients regain or maintain their natural motion, Enovis (NYSE:ENOV) develops and manufactures medical devices for orthopedic care, from injury prevention and pain management to joint replacement and rehabilitation.
Why Do We Avoid ENOV?
- Sales tumbled by 6.5% annually over the last five years, showing market trends are working against its favor during this cycle
- Negative returns on capital show management lost money while trying to expand the business, and its shrinking returns suggest its past profit sources are losing steam
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Enovis’s stock price of $26.43 implies a valuation ratio of 8.2x forward P/E. Dive into our free research report to see why there are better opportunities than ENOV.
PacBio (PACB)
Trailing 12-Month GAAP Operating Margin: -430%
Pioneering what scientists call "HiFi long-read sequencing," recognized as Nature Methods' method of the year for 2022, Pacific Biosciences (NASDAQ:PACB) develops advanced DNA sequencing systems that enable scientists and researchers to analyze genomes with unprecedented accuracy and completeness.
Why Do We Think PACB Will Underperform?
- Annual sales declines of 4.5% for the past two years show its products and services struggled to connect with the market during this cycle
- Increased cash burn over the last five years raises questions about the return timeline for its investments
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
PacBio is trading at $1.88 per share, or 3.3x forward price-to-sales. If you’re considering PACB for your portfolio, see our FREE research report to learn more.
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