Growth companies that have failed to deliver strong results over the last twelve months have taken a beating in the current bear market as investors want more than just promises of future growth. Two businesses that are struggling and haven't impressed investors this year are GoodRx Holdings (GDRX -0.59%) and Beyond Meat (BYND 0.16%). As a result, they are now trading well below the prices they first went public, and long-term investors should tread carefully with these stocks.
1. GoodRx Holdings
GoodRx Holdings, a company that provides customers with coupons on prescription medication, went public in September 2020. It, unfortunately, didn't take long for investors to turn bearish on the stock as Amazon would announce the launch of Amazon Pharmacy just a few months later, signifying more of a presence in healthcare and potentially going head to head with GoodRx. Amazon, a low-cost option for consumers, had acquired online pharmacy PillPack a few years earlier.
Although GoodRx has generated sales growth, and the Amazon threat hasn't derailed its business just yet, the company's mounting losses have given investors another reason to be skeptical about its future. The bottom line has been in the red in three of the past four quarters, with net losses totaling $47.1 million during the trailing 12 months on sales of $803.5 million.
Data by YCharts. YoY = year over year.
When the stock first went public on Sept. 23, 2020, it opened at $46.70. At close of trading on Monday, it was at $5.05, representing an 89% decline in value.
GoodRx could offer significant value for cash-strapped consumers looking to save money on prescriptions and is a beaten-down stock that has the potential to outperform in the long run.
However, with the Nasdaq bear market still in full force, this is a stock that might require lots of patience because it's possible GoodRx's shares will continue to struggle given its unimpressive financials. Unless you have a high risk tolerance, you'll likely want to wait until the company's financial position improves before investing in the stock.
2. Beyond Meat
Meat-substitute company Beyond Meat went public in May 2019 at a price of $46, and the hype around it initially sent its shares soaring to well over $230 just a few months later. But Monday, with shares closing at $14.54, the growth stock was down 68% from its debut three years ago.
The reason for the decline isn't a huge mystery; Beyond Meat's problems aren't unlike GoodRx's. The company has struggled to generate growth and has continually been in the red. And its financials have been much worse: Over the past four quarters, the company's net loss totaled $332.8 million on revenue of $463.6 million.
Beyond Meat's slim gross margins of less than 7% and high selling, general, and administrative costs (56% of revenue) make profitability look like a long shot for the business. Plus, with McDonald's recently ending its McPlant burger (which used Beyond Meat's patties) and the demand proving to be unimpressive, there are doubts about the popularity of Beyond Meat's products.
The company is an even riskier stock than GoodRx because consumer demand is much more of a question mark. Despite the significant drop in value, investors should resist the urge to buy the stock because it still has to prove that it has a path to profitability. At this point, that looks like a pipe dream.
