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.
A lack of profits can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. Keeping that in mind, here are three unprofitable companiesto steer clear of and a few better alternatives.
C3.ai (AI)
Trailing 12-Month GAAP Operating Margin: -203%
Named after the three Cs of its original focus—carbon, cloud computing, and customer relationship management—C3.ai (NYSE:AI) provides enterprise AI software that helps organizations develop, deploy, and operate large-scale artificial intelligence applications across various industries.
Why Is AI Risky?
- Offerings couldn’t generate interest over the last year as its billings have averaged 24.5% declines
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 29.1%, one of the worst among software companies
- Negative free cash flow raises questions about the return timeline for its investments
C3.ai is trading at $10.35 per share, or 7.3x forward price-to-sales. Read our free research report to see why you should think twice about including AI in your portfolio.
Beyond Meat (BYND)
Trailing 12-Month GAAP Operating Margin: -65.7%
A pioneer at the forefront of the plant-based protein revolution, Beyond Meat (NASDAQ:BYND) is a food company specializing in alternatives to traditional meat products.
Why Do We Pass on BYND?
- Declining unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Cash burn has widened over the last year, making us question whether it can reliably generate shareholder value
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Beyond Meat’s stock price of $8.51 implies a valuation ratio of 0.6x trailing 12-month price-to-sales. If you’re considering BYND for your portfolio, see our FREE research report to learn more.
Avantor (AVTR)
Trailing 12-Month GAAP Operating Margin: -4.6%
With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE:AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.
Why Do We Avoid AVTR?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Adjusted operating margin declined by 5.9 percentage points over the last five years as its sales cratered
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
At $15.25 per share, Avantor trades at 17.7x forward P/E. Check out our free in-depth research report to learn more about why AVTR doesn’t pass our bar.
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