Unprofitable companies can burn through cash quickly, leaving investors exposed if they fail to turn things around. Without a clear path to profitability, these businesses risk running out of capital or relying on dilutive fundraising.
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.
America's Car-Mart (CRMT)
Trailing 12-Month GAAP Operating Margin: -7%
With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ:CRMT) sells used cars to budget-conscious consumers.
Why Do We Think CRMT Will Underperform?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Performance over the past three years was negatively impacted by new share issuances as its earnings per share dropped by 92.3% annually, worse than its revenue
- Negative earnings profile makes it challenging to secure favorable financing terms from lenders
At $1.32 per share, America's Car-Mart trades at 24.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why CRMT doesn’t pass our bar.
Zevia (ZVIA)
Trailing 12-Month GAAP Operating Margin: -5.7%
With a primary focus on soda but also a presence in energy drinks and teas, Zevia (NYSE:ZVIA) is a better-for-you beverage company.
Why Does ZVIA Give Us Pause?
- Sales stagnated over the last three years and signal the need for new growth strategies
- Subscale operations are evident in its revenue base of $169.8 million, meaning it has fewer distribution channels than its larger rivals
- Persistent operating margin losses suggest the business manages its expenses poorly
Zevia is trading at $1.22 per share, or 0.5x forward price-to-sales. To fully understand why you should be careful with ZVIA, check out our full research report (it’s free).
Ford (F)
Trailing 12-Month GAAP Operating Margin: -3.7%
Established to make automobiles accessible to a broader segment of the population, Ford (NYSE:F) designs, manufactures, and sells a variety of automobiles, trucks, and electric vehicles.
Why Is F Risky?
- Declining vehicles sold over the past two years indicate demand is soft and that the company may need to revise its strategy
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- High net-debt-to-EBITDA ratio of 8× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Ford’s stock price of $12.17 implies a valuation ratio of 6.9x forward P/E. If you’re considering F for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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