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 is one unprofitable company investing heavily to secure market share and two that could struggle to survive.

Two Stocks to Sell:

Wayfair (W)

Trailing 12-Month GAAP Operating Margin: -2.5%

Founded in 2002 by Niraj Shah, Wayfair (NYSE: W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.

Why Should You Dump W?

1. Intense competition is diverting traffic from its platform as its active customers fell by 1.7% annually
2. Underwhelming performance in both user spending and platform engagement suggests its platform is becoming less effective
3. Bad unit economics and steep infrastructure costs are reflected in its low gross margin of 30.3%

Wayfair’s stock price of $82.61 implies a valuation ratio of 15.6x forward EV/EBITDA. Check out our free in-depth research report to learn more about why W doesn’t pass our bar.

Avis Budget Group (CAR)

Trailing 12-Month GAAP Operating Margin: -1.5%

The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ: CAR) is a provider of car rental and mobility solutions.

Why Do We Steer Clear of CAR?

1. Demand for its offerings was relatively low as its number of available rental days - car rental has underwhelmed
2. Eroding returns on capital suggest its historical profit centers are aging
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

At $146.53 per share, Avis Budget Group trades at 14.8x forward P/E. To fully understand why you should be careful with CAR, check out our full research report (it’s free for active Edge members).

One Stock to Watch:

Freshworks (FRSH)

Trailing 12-Month GAAP Operating Margin: -10.4%

Starting as a customer service solution before expanding into a comprehensive software suite, Freshworks (NASDAQ: FRSH) provides AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales, and marketing functions.

Why Could FRSH Be a Winner?

1. Market share has increased as its 30.5% annual revenue growth over the last five years was exceptional
2. ARR growth averaged 20.9% over the last year, showing customers are willing to take multi-year bets on its software
3. Prominent and differentiated software leads to a stellar gross margin of 84.6%

Freshworks is trading at $11.22 per share, or 3.8x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.

Stocks We Like Even More

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at 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).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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