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. Keeping that in mind, here is one unprofitable company that could turn today’s losses into long-term gains and two that may never reach the Promised Land.
Two Stocks to Sell:
Unity (U)
Trailing 12-Month GAAP Operating Margin: -25.9%
Powering over half of the world's mobile games and expanding into industries from automotive to architecture, Unity (NYSE: U) provides software tools and services that allow developers to create, run, and monetize interactive 2D and 3D content across multiple platforms.
Why Does U Give Us Pause?
- Average billings growth of 3.3% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 14.5%
- Historical operating margin losses point to an inefficient cost structure
Unity is trading at $24.43 per share, or 5.2x forward price-to-sales. Check out our free in-depth research report to learn more about why U doesn’t pass our bar.
Ruger (RGR)
Trailing 12-Month GAAP Operating Margin: -2.1%
Founded in 1949, Ruger (NYSE: RGR) is an American manufacturer of firearms for the commercial sporting market.
Why Do We Avoid RGR?
- Flat sales over the last five years suggest it must innovate and find new ways to grow
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.8% for the last two years
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $42.35 per share, Ruger trades at 22.1x forward P/E. If you’re considering RGR for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Talos Energy (TALO)
Trailing 12-Month GAAP Operating Margin: -30.1%
Operating its own deepwater production facilities with names like Tarantula, Pompano, and Brutus, Talos Energy (NYSE: TALO) explores for and produces oil and natural gas from offshore wells in the Gulf of Mexico and offshore Mexico.
Why Do We Love TALO?
- Impressive 20.8% annual revenue growth over the last eight years indicates it’s winning market share this cycle
- Highly-profitable operating model results in strong unit economics and a premier gross margin of 72.3%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Talos Energy’s stock price of $15.24 implies a valuation ratio of 192.4x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
