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.
A lack of profits can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. Keeping that in mind, here are three unprofitable companiesto steer clear of and a few better alternatives.
Stitch Fix (SFIX)
Trailing 12-Month GAAP Operating Margin: -5.5%
One of the original subscription box companies, Stitch Fix (NASDAQ: SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Why Do We Think SFIX Will Underperform?
- Sluggish trends in its active clients suggest customers aren’t adopting its solutions as quickly as the company hoped
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 24.5% annually, worse than its revenue
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Stitch Fix is trading at $5.15 per share, or 13.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SFIX doesn’t pass our bar.
Coursera (COUR)
Trailing 12-Month GAAP Operating Margin: -13.9%
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 Give Us Pause?
- Decision to emphasize platform growth over monetization has contributed to 5.2% annual declines in its average revenue per customer
- Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its three-year trend
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
At $8.80 per share, Coursera trades at 24.6x forward EV/EBITDA. Read our free research report to see why you should think twice about including COUR in your portfolio.
Masimo (MASI)
Trailing 12-Month GAAP Operating Margin: -13.4%
Founded in 1989 to solve the "unsolvable problem" of accurate pulse oximetry during patient movement, Masimo (NASDAQ: MASI) develops and manufactures noninvasive patient monitoring technologies, including its breakthrough pulse oximetry systems that accurately measure blood oxygen levels even during patient movement.
Why Should You Sell MASI?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Forecasted revenue decline of 6.9% for the upcoming 12 months implies demand will fall even further
- Waning returns on capital imply its previous profit engines are losing steam
Masimo’s stock price of $167 implies a valuation ratio of 31x forward P/E. To fully understand why you should be careful with MASI, check out our full research report (it’s free).
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
