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.

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 is one unprofitable company investing heavily to secure market share and two that could struggle to survive.

Two Stocks to Sell:

Chegg (CHGG)

Trailing 12-Month GAAP Operating Margin: -5.3%

Started as a physical textbook rental service, Chegg (NYSE:CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.

Why Do We Steer Clear of CHGG?

1. Services Subscribers have declined by 27% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
2. Inability to adjust its cost structure while its revenue declined over the last few years led to a 13.5 percentage point drop in the company’s EBITDA margin
3. Earnings per share have contracted by 26% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance

At $0.75 per share, Chegg trades at 2.8x forward EV/EBITDA. To fully understand why you should be careful with CHGG, check out our full research report (it’s free).

Cable One (CABO)

Trailing 12-Month GAAP Operating Margin: -17.5%

Founded in 1986, Cable One (NYSE:CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.

Why Are We Out on CABO?

1. Demand for its offerings was relatively low as its number of residential data subscribers has underwhelmed
2. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.6 percentage points over the next year
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Cable One’s stock price of $7.32 implies a valuation ratio of 3.9x forward EV-to-EBITDA. If you’re considering CABO for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Coursera (COUR)

Trailing 12-Month GAAP Operating Margin: -17.8%

Founded by two Stanford University computer science professors, Coursera (NYSE:COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.

Why Does COUR Stand Out?

1. 15.1% annual revenue growth over the last three years surpassed the sector average as its platform resonated with consumers
2. Demand for the next 12 months is expected to accelerate above its three-year trend as Wall Street forecasts robust revenue growth of 68%
3. Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 68% outpaced its revenue gains

Coursera is trading at $5 per share, or 0.9x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.

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