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.
Unprofitable companies face an uphill battle, but not all are created equal. Luckily for you, StockStory is here to separate the promising ones from the weak. That said, here is one unprofitable company with the potential to become an industry leader and two that could struggle to survive.
Two Stocks to Sell:
Blink Charging (BLNK)
Trailing 12-Month GAAP Operating Margin: -83.3%
One of the first EV charging companies to go public, Blink Charging (NASDAQ: BLNK) is a manufacturer, owner, operator, and provider of electric vehicle charging equipment and networked EV charging services.
Why Is BLNK Not Exciting?
- Annual sales declines of 14.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Negative free cash flow raises questions about the return timeline for its investments
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $0.60 per share, Blink Charging trades at 0.6x forward price-to-sales. Read our free research report to see why you should think twice about including BLNK in your portfolio.
Redwire (RDW)
Trailing 12-Month GAAP Operating Margin: -48.5%
Based in Jacksonville, Florida, Redwire (NYSE: RDW) is a provider of systems and components used in space infrastructure.
Why Are We Cautious About RDW?
- Historically negative EPS casts doubt for cautious investors and clouds its long-term earnings prospects
- 28.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Redwire is trading at $8.98 per share, or 1,526.5x forward EV-to-EBITDA. To fully understand why you should be careful with RDW, check out our full research report (it’s free).
One Stock to Buy:
Zscaler (ZS)
Trailing 12-Month GAAP Operating Margin: -4.9%
Pioneering the "zero trust" approach that has fundamentally changed enterprise network security, Zscaler (NASDAQ: ZS) provides a cloud-based security platform that connects users, devices, and applications securely without traditional network-based security hardware.
Why Are We Bullish on ZS?
- Average billings growth of 24.3% over the last year enhances its liquidity and shows there is steady demand for its products
- Forecasted revenue growth of 20.9% for the next 12 months indicates its momentum over the last two years is sustainable
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Zscaler’s stock price of $142.33 implies a valuation ratio of 6.1x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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