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.
A lack of profits can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. Keeping that in mind, here are three unprofitable companiesthat don’t make the cut and some better opportunities instead.
PlayStudios (MYPS)
Trailing 12-Month GAAP Operating Margin: -12.4%
Founded by a team of former gaming industry executives, PlayStudios (NASDAQ: MYPS) offers free-to-play digital casino games.
Why Are We Wary of MYPS?
- Sales tumbled by 4.4% annually over the last two years, showing consumer trends are working against its favor
- Poor expense management has led to operating margin losses
- Negative returns on capital show management lost money while trying to expand the business
PlayStudios’s stock price of $1.39 implies a valuation ratio of 3.5x forward EV-to-EBITDA. To fully understand why you should be careful with MYPS, check out our full research report (it’s free).
AMC Entertainment (AMC)
Trailing 12-Month GAAP Operating Margin: -2.6%
With a profile that was raised due to meme stock mania beginning in 2021, AMC Entertainment (NYSE: AMC) operates movie theaters primarily in the US and Europe.
Why Do We Think Twice About AMC?
- Annual revenue declines of 2.7% over the last five years indicate problems with its market positioning
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $3.12 per share, AMC Entertainment trades at 2.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including AMC in your portfolio.
Viatris (VTRS)
Trailing 12-Month GAAP Operating Margin: -21.5%
Created through the 2020 merger of Mylan and Pfizer's Upjohn division, Viatris (NASDAQ: VTRS) is a healthcare company that develops, manufactures, and distributes branded and generic medicines across more than 165 countries worldwide.
Why Is VTRS Risky?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.8% annually over the last two years
- Issuance of new shares over the last five years caused its earnings per share to fall by 11.1% annually while its revenue grew
- Push for growth has led to negative returns on capital, signaling value destruction, and its decreasing returns suggest its historical profit centers are aging
Viatris is trading at $9.10 per share, or 3.9x forward P/E. If you’re considering VTRS for your portfolio, see our FREE research report to learn more.
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