Unprofitable companies face headwinds as they struggle to keep operating expenses under control. Some may be investing heavily, but the majority fail to convert spending into sustainable growth.
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 may never reach the Promised Land.
One Stock to Sell:
Neogen (NEOG)
Trailing 12-Month GAAP Operating Margin: -122%
Founded in 1981 and operating at the intersection of food safety and animal health, Neogen (NASDAQ: NEOG) develops and manufactures diagnostic tests and related products to detect dangerous substances in food and pharmaceuticals for animal health.
Why Do We Pass on NEOG?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.8% annually over the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Neogen’s stock price of $5.80 implies a valuation ratio of 18.3x forward P/E. To fully understand why you should be careful with NEOG, check out our full research report (it’s free for active Edge members).
Two Stocks to Watch:
GitLab (GTLB)
Trailing 12-Month GAAP Operating Margin: -11.3%
With its all-remote workforce pioneering a new approach to software development, GitLab (NASDAQ: GTLB) provides a single-application DevSecOps platform that helps development, operations, and security teams collaborate to build, secure, and deploy software faster.
Why Is GTLB a Top Pick?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Prominent and differentiated software leads to a best-in-class gross margin of 88.5%
- GTLB is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
GitLab is trading at $44.89 per share, or 7.2x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Montrose (MEG)
Trailing 12-Month GAAP Operating Margin: -2.5%
Founded to protect a tree-lined two-lane road, Montrose (NYSE: MEG) provides air quality monitoring, environmental laboratory testing, compliance, and environmental consulting services.
Why Are We Positive On MEG?
- Annual revenue growth of 18% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 132% annually, topping its revenue gains
- Free cash flow margin grew by 12.3 percentage points over the last five years, giving the company more chips to play with
At $29.93 per share, Montrose trades at 27.5x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. 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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