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.

Finding the right unprofitable companies is difficult, which is why we started StockStory - to help you navigate the market. Keeping that in mind, here are three unprofitable companiesto avoid and some better opportunities instead.

BILL (BILL)

Trailing 12-Month GAAP Operating Margin: -5.8%

Transforming the messy back-office financial operations that plague small business owners, BILL (NYSE: BILL) provides a cloud-based platform that automates accounts payable, accounts receivable, and expense management for small and midsize businesses.

Why Do We Steer Clear of BILL?

1. Offerings struggled to generate meaningful interest as its average billings growth of 11.7% over the last year did not impress
2. Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
3. Operating margin was unchanged over the last year, suggesting it failed to gain leverage on its fixed costs

BILL is trading at $39.25 per share, or 2.2x forward price-to-sales. If you’re considering BILL for your portfolio, see our FREE research report to learn more.

Wabash (WNC)

Trailing 12-Month GAAP Operating Margin: -4.1%

With its first trailer reportedly built on two sawhorses, Wabash (NYSE: WNC) offers semi trailers, liquid transportation containers, truck bodies, and equipment for moving goods.

Why Do We Pass on WNC?

1. Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 29% declines over the past two years
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

At $7.59 per share, Wabash trades at 0.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than WNC.

RXO (RXO)

Trailing 12-Month GAAP Operating Margin: -1.2%

With access to millions of trucks, RXO (NYSE: RXO) offers full-truckload, less-than-truckload, and last-mile deliveries.

Why Should You Dump RXO?

1. Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

RXO’s stock price of $19.59 implies a valuation ratio of 37.2x forward EV-to-EBITDA. To fully understand why you should be careful with RXO, check out our full research report (it’s free).

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