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.
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 are three unprofitable companies to avoid and some better opportunities instead.
Conagra (CAG)
Trailing 12-Month GAAP Operating Margin: -14.4%
Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.
Why Do We Steer Clear of CAG?
- Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Inability to adjust its cost structure while its revenue declined over the last year led to a 26.2 percentage point drop in the company’s operating margin
At $16.21 per share, Conagra trades at 10.7x forward P/E. Dive into our free research report to see why there are better opportunities than CAG.
Teleflex (TFX)
Trailing 12-Month GAAP Operating Margin: -13.4%
With a portfolio spanning from vascular access catheters to minimally invasive surgical tools, Teleflex (NYSE:TFX) designs, manufactures, and supplies single-use medical devices used in critical care and surgical procedures across hospitals worldwide.
Why Are We Out on TFX?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Sales were less profitable over the last five years as its earnings per share fell by 6.5% annually, worse than its revenue declines
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Teleflex’s stock price of $134.76 implies a valuation ratio of 14.4x forward P/E. To fully understand why you should be careful with TFX, check out our full research report (it’s free).
Dentsply Sirona (XRAY)
Trailing 12-Month GAAP Operating Margin: -8.5%
With roots dating back to 1877 when it introduced the first dental electric drill, Dentsply Sirona (NASDAQ:XRAY) manufactures and sells professional dental equipment, technologies, and consumable products used by dentists and specialists worldwide.
Why Do We Avoid XRAY?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 13.6% annually, worse than its revenue
- Negative returns on capital show management lost money while trying to expand the business, and its decreasing returns suggest its historical profit centers are aging
Dentsply Sirona is trading at $11.44 per share, or 7.5x forward P/E. If you’re considering XRAY for your portfolio, see our FREE research report to learn more.
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