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. That said, here are three unprofitable companiesto steer clear of and a few better alternatives.
Coursera (COUR)
Trailing 12-Month GAAP Operating Margin: -10.2%
Founded by two Stanford University computer science professors, Coursera (NYSE: COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.
Why Are We Wary of COUR?
- Estimated sales growth of 7.2% for the next 12 months implies demand will slow from its three-year trend
- High servicing costs result in an inferior gross margin of 54.1% that must be offset through higher volumes
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
Coursera is trading at $6.42 per share, or 3.8x forward EV/EBITDA. If you’re considering COUR for your portfolio, see our FREE research report to learn more.
Under Armour (UAA)
Trailing 12-Month GAAP Operating Margin: -4%
Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE: UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.
Why Do We Steer Clear of UAA?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Under Armour’s stock price of $6.52 implies a valuation ratio of 34.3x forward P/E. Dive into our free research report to see why there are better opportunities than UAA.
EchoStar (SATS)
Trailing 12-Month GAAP Operating Margin: -118%
Following its 2023 acquisition of DISH Network, EchoStar (NASDAQ: SATS) provides satellite communications, pay-TV services, wireless networks, and broadband solutions across consumer and enterprise markets.
Why Do We Pass on SATS?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.1% annually over the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Negative earnings profile makes it challenging to secure favorable financing terms from lenders
At $133.39 per share, EchoStar trades at 30.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SATS in your portfolio.
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