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.
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.
Advance Auto Parts (AAP)
Trailing 12-Month GAAP Operating Margin: -10.1%
Founded in Virginia in 1932, Advance Auto Parts (NYSE:AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.
Why Should You Dump AAP?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Operating margin declined by 10.4 percentage points over the last year as its sales cratered
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Advance Auto Parts’s stock price of $58.17 implies a valuation ratio of 27.4x forward P/E. If you’re considering AAP for your portfolio, see our FREE research report to learn more.
1-800-FLOWERS (FLWS)
Trailing 12-Month GAAP Operating Margin: -2.8%
Founded in 1976, 1-800-FLOWERS (NASDAQ:FLWS) is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.
Why Should You Sell FLWS?
- Annual revenue declines of 9.9% over the last two years indicate problems with its market positioning
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 18.4% annually
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
1-800-FLOWERS is trading at $6.28 per share, or 21.6x forward P/E. Check out our free in-depth research report to learn more about why FLWS doesn’t pass our bar.
EVgo (EVGO)
Trailing 12-Month GAAP Operating Margin: -47.9%
Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ:EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.
Why Does EVGO Give Us Pause?
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Cash-burning history makes us doubt the long-term viability of its business model
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $3.60 per share, EVgo trades at 30.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than EVGO.
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