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. That said, here is one unprofitable company with the potential to become an industry leader and two that may never reach the Promised Land.
Two Stocks to Sell:
ZoomInfo (GTM)
Trailing 12-Month GAAP Operating Margin: -35.2%
Operating a platform it calls "RevOS" - short for Revenue Operating System - ZoomInfo (NASDAQ: GTM) provides sales, marketing, and recruiting teams with business intelligence and analytics to identify prospects and deliver targeted outreach.
Why Do We Steer Clear of GTM?
- Offerings struggled to generate interest as its billings were flat over the last year
- Forecasted revenue decline of 6.2% for the upcoming 12 months implies demand will fall off a cliff
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 49.7 percentage points
At $3.88 per share, ZoomInfo trades at 1x forward price-to-sales. Check out our free in-depth research report to learn more about why GTM doesn’t pass our bar.
America's Car-Mart (CRMT)
Trailing 12-Month GAAP Operating Margin: -1.3%
With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ: CRMT) sells used cars to budget-conscious consumers.
Why Is CRMT Risky?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Performance over the past three years was negatively impacted by new share issuances as its earnings per share dropped by 41.5% annually, worse than its revenue
- EBITDA losses may force it to accept punitive lending terms or high-cost debt
America's Car-Mart’s stock price of $2.88 implies a valuation ratio of 27.2x forward EV-to-EBITDA. To fully understand why you should be careful with CRMT, check out our full research report (it’s free).
One Stock to Watch:
Coursera (COUR)
Trailing 12-Month GAAP Operating Margin: -17.8%
Founded by two Stanford University computer science professors, Coursera (NYSE: COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.
Why Are We Positive on COUR?
- Strong consumer demand for its platform drove 15.1% annual revenue growth over the last three years, outperforming sector peers
- Market share is on track to rise over the next 12 months as its 68% projected revenue growth implies demand will accelerate from its three-year trend
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 68% annually, topping its revenue gains
Coursera is trading at $5.87 per share, or 1.6x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
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