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 is one unprofitable company with the potential to become an industry leader and two that may never reach the Promised Land.
Two Stocks to Sell:
Varonis Systems (VRNS)
Trailing 12-Month GAAP Operating Margin: -22.3%
Beginning with protecting Windows file shares in 2005 and evolving into a comprehensive security platform, Varonis Systems (NASDAQ: VRNS) provides data security software that helps organizations protect sensitive information, detect threats, and comply with privacy regulations.
Why Should You Dump VRNS?
- Revenue increased by 16.1% annually over the last five years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 2.5 percentage points
Varonis Systems’s stock price of $42.45 implies a valuation ratio of 6.3x forward price-to-sales. If you’re considering VRNS for your portfolio, see our FREE research report to learn more.
Clarus (CLAR)
Trailing 12-Month GAAP Operating Margin: -23.4%
Initially a financial services business, Clarus (NASDAQ: CLAR) designs, manufactures, and distributes outdoor equipment and lifestyle products.
Why Do We Steer Clear of CLAR?
- Products and services fail to spark excitement with consumers, as seen in its flat sales over the last five years
- Cash-burning history makes us doubt the long-term viability of its business model
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Clarus is trading at $3.21 per share, or 38.2x forward P/E. Check out our free in-depth research report to learn more about why CLAR doesn’t pass our bar.
One Stock to Watch:
Helmerich & Payne (HP)
Trailing 12-Month GAAP Operating Margin: -5.7%
Operating the largest fleet of super-spec rigs in North America with technology that can drill horizontal wells over two miles long, Helmerich & Payne (NYSE: HP) provides drilling rigs and crews to oil and gas companies that need wells drilled to extract hydrocarbons from underground.
Why Do We Watch HP?
- Annual revenue growth of 32.2% over the past five years was outstanding, reflecting market share gains this cycle
- Revenue base of $4.00 billion gives it economies of scale and some negotiating power with suppliers
- EBITDA profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
At $31.05 per share, Helmerich & Payne trades at 31.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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.
