The stock market is a two-way street, and stocks can rise just as easily as they can fall. One way seasoned investors make their odds of success better than a coin flip is by examining the underlying fundamentals of businesses, along with their long-term growth prospects.
Businesses that look cheap and/or have staying power are perceived to have a better chance of seeing their stock prices rise over the long term. Conversely, companies that are constantly losing money or market share or have uncertain futures are more likely to see their stock prices languish.
With that in mind, let's take a look at a handful of companies that have made a science of losing money and thus may not be suitable investments for your money. There are only two ground rules: One, biotechs are off-limits (with one notable exception that'll we'll get to below), as biotech companies often have to go deeply into the red in order to develop their pipelines; and two, the companies must have a market value of least $250 million.
The following companies just keep bleeding money, and they may not stop anytime soon.
Among large caps, wireless communications provider Sprint is the poster child of losing money.
Sprint hasn't turned in an annual profit since 2006 (yes, 2006!), and even worse, Wall Street is forecasting that its next annual profit isn't in the cards until 2018! Including its $29.7 billion goodwill impairment charge in 2007, Sprint has tallied $50.7 billion in cumulative losses between fiscal 2007 and fiscal 2014. Making matters worse, its free cash flow has turned from positive to negative over the last three years. Over the trailing 12-month period Sprint has burned through a whopping $5.4 billion in cash.
What's wrong with Sprint? I suspect it's simply outmatched by the likes of telecom giants AT&T and Verizon. Even with SoftBank in its corner, Sprint doesn't have the capital to rapidly expand its next-generation infrastructure in order to mount an effective challenge against the industry's top dogs. As such, Sprint finds itself in fourth place in terms of wireless brand loyalty, according to Brand Keys' 2015 Customer Loyalty Engagement Index.
The only certainty for Sprint is that the future holds more belt-tightening and job cuts. Sprint outlined plans just a few days ago to cut between $2 billion and $2.5 billion out of its annual expenses without cutting the funds used to expand its next-generation infrastructure. That won't be an easy task, and I don't expect Sprint to find its business on solid footing anytime soon.
CTI BioPharma (NASDAQ:CTIC)
When it comes to losing money, biotech stocks often get a pass. Developing a pipeline of viable treatments is so capital-intensive that it's perhaps the only industry that Wall Street and investors are willing to value based on future sales and patient pool potential.
However, we'll make one exception to the no-biotech rule: CTI BioPharma, which has lost a staggering $2 billion since inception. No, that's not a misprint: Since being founded in 1991, CTI BioPharma has accumulated negative earnings of $2 billion as of the second quarter of 2015.
The only success CTI has to show throughout its two-decade history is the approval of Pixuvri to treat multiply relapsed aggressive B-cell non-Hodgkin lymphoma. In the first half of 2015, Pixuvri sales totaled a mere $3.8 million. Meanwhile, CTI lost $61.2 million in the first half of 2015. Further, CTI's cash on hand totaled less than $55 million by the end Q2, putting the company on pace to run out of cash within the next couple of quarters.
The only recourse CTI BioPharma has at present to boost its capital on hand is to issue common stock -- something it has done too many times to count over its publicly traded history. With its share count having ballooned from 25.3 million shares at the end of 2010 to 175.5 million by mid-2015, this money-losing dilution machine could prove toxic to your portfolio.
Even with NASCAR driver Danica Patrick garnering the attention of millions of Americans, GoDaddy -- provider of online domains, Web hosting, and cloud solutions -- remains unable to turn a profit.
Since its founding 18 years ago, GoDaddy has lost money each and every year. As of its latest quarterly report, in which it recorded a whopping $71.3 million loss, GoDaddy has lost $790.5 million since inception! It has also made a less-than-stellar impression on Wall Street, whiffing on its EPS estimates in its first two quarters as a publicly traded company.
On the surface, GoDaddy's Web hosting potential for small businesses is a big opportunity that could translate into market-topping growth. Unfortunately, that opportunity also involves reinvesting every cent of cash flow back into the business. It's not uncommon to see Web-based companies reinvesting back into the business; however, most aren't lugging around $1.05 billion in long-term debt. Given that minimal annual profits are not expected by Wall Street until 2017, and it's uncertain how GoDaddy will deal with its mountain of debt, you might want to pass up this possible "dot-bomb."
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.