Unprofitable companies face headwinds as they struggle to keep operating expenses under control. Some may be investing heavily, but the majority fail to convert spending into sustainable growth.
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. Keeping that in mind, here is one unprofitable company investing heavily to secure market share and two that may never reach the Promised Land.
Two Stocks to Sell:
Stitch Fix (SFIX)
Trailing 12-Month GAAP Operating Margin: -1.6%
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 Is SFIX Risky?
- Performance surrounding its active clients has lagged its peers
- Earnings per share lagged its peers over the last five years as they only grew by 11.5% annually
- Free cash flow margin is projected to show no improvement next year
Stitch Fix’s stock price of $2.51 implies a valuation ratio of 6.7x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SFIX in your portfolio.
Gilead Sciences (GILD)
Trailing 12-Month GAAP Operating Margin: -8.2%
From its groundbreaking work in developing the first single-tablet regimens for HIV treatment, Gilead Sciences (NASDAQ:GILD) develops and markets innovative medicines for life-threatening diseases including HIV, viral hepatitis, COVID-19, and cancer.
Why Does GILD Fall Short?
- Annual sales growth of 2.7% over the last five years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 34.2 percentage points
- Earnings per share have contracted by 15.4% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
At $156.54 per share, Gilead Sciences trades at 17.1x forward P/E. To fully understand why you should be careful with GILD, check out our full research report (it’s free).
One Stock to Watch:
GitLab (GTLB)
Trailing 12-Month GAAP Operating Margin: -8.5%
With its all-remote workforce pioneering a new approach to software development, GitLab (NASDAQ:GTLB) provides a single-application DevSecOps platform that helps development, operations, and security teams collaborate to build, secure, and deploy software faster.
Why Does GTLB Stand Out?
- Annual revenue growth of 25.9% over the past two years was outstanding, reflecting market share gains
- ARR growth averaged 23.3% over the last year, showing customers are willing to take multi-year bets on its software
- Superior software functionality and low servicing costs lead to a best-in-class gross margin of 85.9%
GitLab is trading at $52.33 per share, or 7.8x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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 Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.