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.
A lack of profits can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here are three unprofitable companiesto avoid and some better opportunities instead.
Redfin (RDFN)
Trailing 12-Month GAAP Operating Margin: -13.3%
Founded by a former medical school student, electrical engineer, and Amazon data engineer, Redfin (NASDAQ: RDFN) is a real estate company offering brokerage services through an online platform.
Why Do We Pass on RDFN?
- Number of brokerage transactions has disappointed over the past two years, indicating weak demand for its offerings
- Earnings per share fell by 9.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- EBITDA losses may force it to accept punitive lending terms or high-cost debt
Redfin’s stock price of $11.30 implies a valuation ratio of 86.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why RDFN doesn’t pass our bar.
Hertz (HTZ)
Trailing 12-Month GAAP Operating Margin: -11.4%
Started with a dozen Model T Fords, Hertz (NASDAQ: HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.
Why Are We Out on HTZ?
- Underwhelming unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Diminishing returns on capital suggest its earlier profit pools are drying up
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Hertz is trading at $7.44 per share, or 6.3x forward EV-to-EBITDA. If you’re considering HTZ for your portfolio, see our FREE research report to learn more.
Alight (ALIT)
Trailing 12-Month GAAP Operating Margin: -2.5%
Born from a corporate spinoff in 2017 to focus on employee experience technology, Alight (NYSE: ALIT) provides human capital management solutions that help companies administer employee benefits, payroll, and workforce management systems.
Why Do We Think ALIT Will Underperform?
- Sales tumbled by 1.9% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share have dipped by 3.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- ROIC of 0.6% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging
At $5.76 per share, Alight trades at 9.1x forward P/E. To fully understand why you should be careful with ALIT, check out our full research report (it’s free).
Stocks We Like More
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Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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