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.
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 companies that don’t make the cut and some better opportunities instead.
MongoDB (MDB)
Trailing 12-Month GAAP Operating Margin: -4.2%
Named after "humongous database," reflecting its ability to handle massive data loads, MongoDB (NASDAQ: MDB) provides a flexible document-based database platform that helps developers build, deploy, and maintain modern applications more efficiently.
Why Does MDB Fall Short?
- Complex implementation process for enterprise clients means customers take longer to ramp up, as seen in its extended payback periods
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 3.9 percentage points
MongoDB is trading at $403.07 per share, or 10.7x forward price-to-sales. Check out our free in-depth research report to learn more about why MDB doesn’t pass our bar.
Albany (AIN)
Trailing 12-Month GAAP Operating Margin: -1.4%
Founded in 1895, Albany (NYSE: AIN) is a global textiles and materials processing company, specializing in machine clothing for paper mills and engineered composite structures for aerospace and other industries.
Why Do We Avoid AIN?
- Sales tumbled by 1.1% annually over the last two years, showing market trends are working against it during this cycle
- Earnings per share fell by 5.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $58.14 per share, Albany trades at 1.4x trailing 12-month price-to-sales. If you’re considering AIN for your portfolio, see our FREE research report to learn more.
Patterson-UTI (PTEN)
Trailing 12-Month GAAP Operating Margin: -1.1%
Operating 135 Tier-1 super-spec rigs that can handle the industry's most demanding drilling projects, Patterson-UTI (NASDAQ: PTEN) provides contract drilling rigs, hydraulic fracturing, and drill bits to oil and gas operators.
Why Do We Think Twice About PTEN?
- High extraction costs and unfavorable asset economics are reflected in its low gross margin of 29.9%
- Static EBITDA margin over the last five years shows it couldn’t become more efficient
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 5.8% for the last five years
Patterson-UTI’s stock price of $11.57 implies a valuation ratio of 63.8x forward P/E. Dive into our free research report to see why there are better opportunities than PTEN.
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