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. That said, here are three unprofitable companiesto avoid and some better opportunities instead.
Jamf (JAMF)
Trailing 12-Month GAAP Operating Margin: -8.1%
Founded in 2002 by Zach Halmstad and Chip Pearson, right around the time when Apple began to dominate the personal computing market, Jamf (NASDAQ: JAMF) provides software for companies to manage Apple devices such as Macs, iPads, and iPhones.
Why Does JAMF Give Us Pause?
- Annual revenue growth of 17.7% over the last three years was below our standards for the software sector
- Offerings struggled to generate meaningful interest as its average billings growth of 8.9% over the last year did not impress
- Poor expense management has led to operating margin losses
At $8.70 per share, Jamf trades at 1.7x forward price-to-sales. To fully understand why you should be careful with JAMF, check out our full research report (it’s free).
AMC Networks (AMCX)
Trailing 12-Month GAAP Operating Margin: -3.6%
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 Should You Sell AMCX?
- Annual sales declines of 4.6% for the past five years show its products and services struggled to connect with the market
- Sales were less profitable over the last five years as its earnings per share fell by 17.7% annually, worse than its revenue declines
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
AMC Networks is trading at $6.04 per share, or 2x forward P/E. If you’re considering AMCX for your portfolio, see our FREE research report to learn more.
Rocket Lab (RKLB)
Trailing 12-Month GAAP Operating Margin: -44.2%
Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ: RKLB) offers rockets designed for launching small satellites.
Why Are We Hesitant About RKLB?
- Historically negative EPS is a worrisome sign for conservative investors and obscures its long-term earnings potential
- Negative free cash flow raises questions about the return timeline for its investments
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Rocket Lab’s stock price of $39.16 implies a valuation ratio of 31.2x forward price-to-sales. Check out our free in-depth research report to learn more about why RKLB doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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