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.
Finding the right unprofitable companies is difficult, which is why we started StockStory - to help you navigate the market. Keeping that in mind, here are three unprofitable companiesto avoid and some better opportunities instead.
Yext (YEXT)
Trailing 12-Month GAAP Operating Margin: -7.7%
Founded in 2006 by Howard Lerman, Yext (NYSE:YEXT) offers software as a service that helps their clients manage and monitor their online listings and customer reviews across all relevant databases, from Google Maps to Alexa or Siri.
Why Do We Avoid YEXT?
Underwhelming ARR growth of 4% over the last year suggests the company faced challenges in acquiring and retaining long-term customers
Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 6.2 percentage points
Founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work, Olo (NYSE:OLO) provides restaurants and food retailers with software to manage food orders and delivery.
Why Do We Think Twice About OLO?
Sky-high servicing costs result in an inferior gross margin of 54.9% that must be offset through increased usage
Operating losses show it sacrificed profitability while scaling the business
Free cash flow margin is expected to remain in place over the coming year
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate.
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