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. Keeping that in mind, here are three unprofitable companiesthat don’t make the cut and some better opportunities instead.
OneWater (ONEW)
Trailing 12-Month GAAP Operating Margin: -4.6%
A public company since early 2020, OneWater Marine (NASDAQ: ONEW) sells boats, yachts, and other marine products.
Why Do We Avoid ONEW?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Revenue growth over the past three years was nullified by the company’s new share issuances as its earnings per share fell by 66.6% annually
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
OneWater is trading at $10.82 per share, or 17.3x forward P/E. Dive into our free research report to see why there are better opportunities than ONEW.
Marcus & Millichap (MMI)
Trailing 12-Month GAAP Operating Margin: -3%
Founded in 1971, Marcus & Millichap (NYSE: MMI) specializes in commercial real estate investment sales, financing, research, and advisory services.
Why Should You Dump MMI?
- Sales trends were unexciting over the last five years as its 1.3% annual growth was below the typical consumer discretionary company
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Marcus & Millichap’s stock price of $27.29 implies a valuation ratio of 59.5x forward P/E. If you’re considering MMI for your portfolio, see our FREE research report to learn more.
Icahn Enterprises (IEP)
Trailing 12-Month GAAP Operating Margin: -2.1%
Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.
Why Are We Wary of IEP?
- Annual sales declines of 9.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $7.55 per share, Icahn Enterprises trades at 0.5x forward price-to-sales. To fully understand why you should be careful with IEP, check out our full research report (it’s free for active Edge members).
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