3 Unprofitable Stocks with Questionable Fundamentals

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.

Upland Software (UPLD)

Trailing 12-Month GAAP Operating Margin: -5.3%

Operating under the mantra "land and expand," Upland Software (NASDAQ:UPLD) provides cloud-based applications that help organizations manage projects, workflows, and digital transformation across various business functions.

Why Do We Think Twice About UPLD?

1. Sales stagnated over the last five years and signal the need for new growth strategies
2. Sales are projected to tank by 19.2% over the next 12 months as its demand continues evaporating
3. Historical operating margin losses point to an inefficient cost structure

At $2.43 per share, Upland Software trades at 0.3x forward price-to-sales. Read our free research report to see why you should think twice about including UPLD in your portfolio.

Driven Brands (DRVN)

Trailing 12-Month GAAP Operating Margin: -8.1%

With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ:DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.

Why Is DRVN Risky?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Driven Brands’s stock price of $15.40 implies a valuation ratio of 11.7x forward P/E. Dive into our free research report to see why there are better opportunities than DRVN.

Lucid (LCID)

Trailing 12-Month GAAP Operating Margin: -323%

Founded by a former Tesla Vice President, Lucid Group (NASDAQ:LCID) designs, manufactures, and sells luxury electric vehicles with long-range capabilities.

Why Are We Cautious About LCID?

1. Negative 155% gross margin means it loses money on every sale and must pivot or scale quickly to survive
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Lucid is trading at $21.37 per share, or 33.1x forward price-to-sales. Check out our free in-depth research report to learn more about why LCID doesn’t pass our bar.

Stocks We Like More

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