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.
A lack of profits can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. Keeping that in mind, here are three unprofitable companiesto steer clear of and a few better alternatives.
Trailing 12-Month GAAP Operating Margin: -22%
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 Do We Steer Clear of VRNS?
Offerings struggled to generate meaningful interest as its average billings growth of 13% over the last year did not impress
Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
Efficiency has decreased over the last year as its operating margin fell by 1.6 percentage points
Varonis Systems's stock price of $40.84 implies a valuation ratio of 5.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than VRNS.
Trailing 12-Month GAAP Operating Margin: -4.2%
Pioneering the use of lithium-ion batteries for grid storage, Fluence (NASDAQ:FLNC) helps store renewable energy sources with battery systems.
Historically negative EPS raises concerns for risk-averse investors and makes its earnings potential harder to gauge
Cash-burning history makes us doubt the long-term viability of its business model
Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly
Fluence Energy is trading at $11.25 per share, or 451x forward P/E. Check out our free in-depth research report to learn more about why FLNC doesn't pass our bar.
Powering forklifts for Walmart's distribution centers, Plug Power (NASDAQ:PLUG) provides hydrogen fuel cells used to power electric motors.
Why Do We Think Twice About PLUG?
Annual revenue growth of 4.3% over the last two years was below our standards for the industrials sector
Cash burn makes us question whether it can achieve sustainable long-term growth
Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $2.27 per share, Plug Power trades at 3.4x forward price-to-sales. To fully understand why you should be careful with PLUG, check out our full research report (it's free).
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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.