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.
Finding the right unprofitable companies is difficult, which is why we started StockStory - to help you navigate the market. That said, here are two unprofitable companies with the potential to become industry leaders and one that could struggle to survive.
One Stock to Sell:
Masimo (MASI)
Trailing 12-Month GAAP Operating Margin: -9%
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 Does MASI Fall Short?
- Sales tumbled by 16.3% annually over the last two years, showing market trends are working against its favor during this cycle
- Revenue base of $1.48 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $177.11 per share, Masimo trades at 31.2x forward P/E. Dive into our free research report to see why there are better opportunities than MASI.
Two Stocks to Watch:
Cloudflare (NET)
Trailing 12-Month GAAP Operating Margin: -9.6%
With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE: NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.
Why Will NET Outperform?
- Average billings growth of 33% over the last year enhances its liquidity and shows there is steady demand for its products
- Notable projected revenue growth of 28.8% for the next 12 months hints at market share gains
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
Cloudflare’s stock price of $200.50 implies a valuation ratio of 26.4x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Snap (SNAP)
Trailing 12-Month GAAP Operating Margin: -9%
Founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, and originally called Picaboo, Snapchat (NYSE: SNAP) is an image centric social media network.
Why Does SNAP Stand Out?
- Excellent EBITDA margin of 10.6% highlights the efficiency of its business model, and its profits increased over the last few years as it scaled
- Additional sales over the last three years increased its profitability as the 27.9% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin increased by 6.2 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Snap is trading at $3.95 per share, or 7.8x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
