In This Article:
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. That said, here is one unprofitable company that could turn today’s losses into long-term gains and two that could struggle to survive.
Two Stocks to Sell:
Bumble (BMBL)
Trailing 12-Month GAAP Operating Margin: -67%
Started by the co-founder of Tinder, Whitney Wolfe Herd, Bumble (NASDAQ:BMBL) is a leading dating app built with women at the center.
Why Does BMBL Fall Short?
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Decision to emphasize platform growth over monetization has contributed to 4.9% annual declines in its average revenue per buyer
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Forecasted revenue decline of 11.1% for the upcoming 12 months implies demand will fall off a cliff
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Free cash flow margin dropped by 4.4 percentage points over the last few years, implying the company became more capital intensive as competition picked up
At $5.76 per share, Bumble trades at 2.5x forward EV/EBITDA. To fully understand why you should be careful with BMBL, check out our full research report (it’s free).
Chegg (CHGG)
Trailing 12-Month GAAP Operating Margin: -135%
Started as a physical textbook rental service, Chegg (NYSE:CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.
Why Do We Think CHGG Will Underperform?
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Struggled with new customer acquisition as its services subscribers averaged 13.4% declines
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Overall productivity fell over the last few years as its plummeting sales were accompanied by a decline in its EBITDA margin
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Sales were less profitable over the last three years as its earnings per share fell by 30.8% annually, worse than its revenue declines
Chegg is trading at $1.01 per share, or 1.7x forward EV/EBITDA. Read our free research report to see why you should think twice about including CHGG in your portfolio, it’s free.
One Stock to Watch:
Workiva (WK)
Trailing 12-Month GAAP Operating Margin: -10.8%
Founded in 2010, Workiva (NYSE:WK) offers software as a service product that makes financial and compliance reporting easier, especially for publicly traded corporations.
Why Does WK Stand Out?
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Ability to secure long-term commitments with customers is evident in its 19.5% ARR growth over the last year
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Forecasted revenue growth of 16.9% for the next 12 months suggests stronger momentum versus most peers
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Superior software functionality and low servicing costs are reflected in its stellar gross margin of 76.7%