Running at a loss can be a red flag. Many of these businesses face mounting challenges as competition increases and funding becomes harder to secure.
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 are three unprofitable companiesthat don’t make the cut and some better opportunities instead.
PubMatic (PUBM)
Trailing 12-Month GAAP Operating Margin: -7.3%
Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ:PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.
Why Do We Avoid PUBM?
- Platform has low switching costs as its net revenue retention rate of 96% demonstrates high turnover
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Free cash flow margin is forecasted to shrink by 9.4 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
At $12.04 per share, PubMatic trades at 1.9x forward price-to-sales. If you’re considering PUBM for your portfolio, see our FREE research report to learn more.
Array (ARRY)
Trailing 12-Month GAAP Operating Margin: -4.1%
Going public in October 2020, Array (NASDAQ:ARRY) is a global manufacturer of ground-mounting tracking systems for utility and distributed generation solar energy projects.
Why Should You Dump ARRY?
- Sales tumbled by 5.6% annually over the last two years, showing market trends are working against it during this cycle
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Array’s stock price of $9.22 implies a valuation ratio of 11.9x forward P/E. Read our free research report to see why you should think twice about including ARRY in your portfolio.
Plug Power (PLUG)
Trailing 12-Month GAAP Operating Margin: -189%
Powering forklifts for Walmart’s distribution centers, Plug Power (NASDAQ:PLUG) provides hydrogen fuel cells used to power electric motors.
Why Are We Wary of PLUG?
- Annual sales declines of 3.9% for the past two years show its products and services struggled to connect with the market during this cycle
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Plug Power is trading at $4.07 per share, or 6.6x forward price-to-sales. Check out our free in-depth research report to learn more about why PLUG doesn’t pass our bar.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.