3 Unprofitable Stocks with Open Questions

Running at a loss can be a red flag. Many of these businesses face mounting challenges as competition increases and funding becomes harder to secure.

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 companiesthat don’t make the cut and some better opportunities instead.

Asure Software (ASUR)

Trailing 12-Month GAAP Operating Margin: -10.2%

Operating in the often-overlooked smaller metropolitan markets where HR expertise can be scarce, Asure Software (NASDAQ:ASUR) provides cloud-based human capital management software and services that help small and medium-sized businesses manage payroll, taxes, time tracking, and HR compliance.

Why Does ASUR Worry Us?

1. Revenue increased by 14.3% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
2. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 7.1% underwhelmed
3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 3.2 percentage points

Asure Software is trading at $8.41 per share, or 1.5x forward price-to-sales. Read our free research report to see why you should think twice about including ASUR in your portfolio.

Clover Health (CLOV)

Trailing 12-Month GAAP Operating Margin: -2.6%

Founded in 2014 to improve healthcare for America's seniors through technology, Clover Health (NASDAQ:CLOV) provides Medicare Advantage plans for seniors with a focus on affordable care and uses its proprietary Clover Assistant software to help physicians manage patient care.

Why Do We Think Twice About CLOV?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 18.1% annually over the last two years
2. Revenue base of $1.61 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
3. Cash-burning history makes us doubt the long-term viability of its business model

At $2.62 per share, Clover Health trades at 18.6x forward P/E. To fully understand why you should be careful with CLOV, check out our full research report (it’s free).

PAR Technology (PAR)

Trailing 12-Month GAAP Operating Margin: -15.5%

Originally founded in 1968 as a defense contractor for the U.S. government, PAR Technology (NYSE:PAR) provides cloud-based software, payment processing, and hardware solutions that help restaurants manage everything from point-of-sale to customer loyalty programs.

Why Is PAR Not Exciting?

1. Negative free cash flow raises questions about the return timeline for its investments
2. Negative returns on capital show that some of its growth strategies have backfired
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

PAR Technology’s stock price of $52.25 implies a valuation ratio of 138.4x forward P/E. Dive into our free research report to see why there are better opportunities than PAR.

High-Quality Stocks for All Market Conditions

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