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.
Finding the right unprofitable companies is difficult, which is why we started StockStory — to help you navigate the market. That said, here are three unprofitable companies to avoid and some better opportunities instead.
Sportsman's Warehouse (SPWH)
Trailing 12-Month GAAP Operating Margin: -1%
A go-to destination for individuals passionate about hunting, fishing, camping, hiking, shooting sports, and more, Sportsman's Warehouse (NASDAQ:SPWH) is an American specialty retailer offering a diverse range of active gear, equipment, and apparel.
Why Do We Think SPWH Will Underperform?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Performance over the past three years was negatively impacted by new share issuances as its earnings per share dropped by 41.4% annually, worse than its revenue
- High net-debt-to-EBITDA ratio of 18× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Sportsman's Warehouse’s stock price of $1.19 implies a valuation ratio of 16.9x forward EV-to-EBITDA. To fully understand why you should be careful with SPWH, check out our full research report (it’s free).
Array (ARRY)
Trailing 12-Month GAAP Operating Margin: -5.1%
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 Are We Out on ARRY?
- Sales trends were unexciting over the last two years as its 3.7% annual growth was below the typical industrials company
- Issuance of new shares over the last five years caused its earnings per share to fall by 3.1% annually while its revenue grew
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $5.54 per share, Array trades at 6.9x forward P/E. Check out our free in-depth research report to learn more about why ARRY doesn’t pass our bar.
Quanex (NX)
Trailing 12-Month GAAP Operating Margin: -11.1%
Starting in the seamless tube industry, Quanex (NYSE:NX) manufactures building products like window, door, kitchen, and bath cabinet components.
Why Are We Cautious About NX?
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 19.5 percentage points
- Revenue growth over the past two years was nullified by the company’s new share issuances as its earnings per share fell by 20.1% annually
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Quanex is trading at $21.98 per share, or 11x forward P/E. Read our free research report to see why you should think twice about including NX in your portfolio.
Stocks We Like More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.