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.
Finding the right unprofitable companies is difficult, which is why we started StockStory — to help you navigate the market. That said, here are three unprofitable companies to avoid and some better opportunities instead.
Health Catalyst (HCAT)
Trailing 12-Month GAAP Operating Margin: -84.4%
Built on its "Health Catalyst Flywheel" methodology that emphasizes measurable outcomes, Health Catalyst (NASDAQ:HCAT) provides data and analytics technology and services that help healthcare organizations manage their data and drive measurable clinical, financial, and operational improvements.
Why Is HCAT Risky?
- Billings have dropped by 14.4% over the last year, suggesting it might have to lower prices to stimulate growth
- Gross margin of 51.2% is way below its competitors, leaving less money to invest in areas like marketing and R&D
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
At $1.76 per share, Health Catalyst trades at 0.6x forward price-to-sales. To fully understand why you should be careful with HCAT, check out our full research report (it’s free).
Angi (ANGI)
Trailing 12-Month GAAP Operating Margin: -21.7%
Created by IAC’s mergers of Angie’s List and HomeAdvisor, ANGI (NASDAQ: ANGI) operates the largest online marketplace for home services in the US.
Why Is ANGI Not Exciting?
- Value proposition isn’t resonating strongly as its service requests averaged 17.1% drops over the last two years
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- High marketing expenses suggest it needs to spend heavily on new customer acquisition to sustain momentum
Angi’s stock price of $5.19 implies a valuation ratio of 3.9x forward EV/EBITDA. If you’re considering ANGI for your portfolio, see our FREE research report to learn more.
PacBio (PACB)
Trailing 12-Month GAAP Operating Margin: -83.5%
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 Does PACB Give Us Pause?
- Annual sales declines of 8.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
PacBio is trading at $1.55 per share, or 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why PACB doesn’t pass our bar.
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