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.
Unprofitable companies face an uphill battle, but not all are created equal. Luckily for you, StockStory is here to separate the promising ones from the weak. Keeping that in mind, here is one unprofitable company that could turn today’s losses into long-term gains and two that could struggle to survive.
Two Stocks to Sell:
nLIGHT (LASR)
Trailing 12-Month GAAP Operating Margin: -33.1%
Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ: LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.
Why Do We Avoid LASR?
- Annual sales declines of 9.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
nLIGHT is trading at $8.80 per share, or 2x forward price-to-sales. Read our free research report to see why you should think twice about including LASR in your portfolio.
Evolent Health (EVH)
Trailing 12-Month GAAP Operating Margin: -1.6%
Founded in 2011 to transform how healthcare is delivered to patients with complex needs, Evolent Health (NYSE: EVH) provides specialty care management services and technology solutions that help health plans and providers deliver better care for patients with complex conditions.
Why Does EVH Worry Us?
- Sales are projected to tank by 18.9% over the next 12 months as demand evaporates
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0.3% for the last five years
- Negative returns on capital show that some of its growth strategies have backfired
Evolent Health’s stock price of $10.50 implies a valuation ratio of 16.3x forward P/E. Check out our free in-depth research report to learn more about why EVH doesn’t pass our bar.
One Stock to Watch:
Impinj (PI)
Trailing 12-Month GAAP Operating Margin: -1.3%
Founded by Caltech professor Carver Mead and one of his students Chris Diorio, Impinj (NASDAQ: PI) is a maker of radio-frequency identification (RFID) hardware and software.
Why Is PI on Our Radar?
- Annual revenue growth of 11.9% over the last two years was superb and indicates its market share increased during this cycle
- Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 48.4% outpaced its revenue gains
- Free cash flow margin increased by 23.7 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $102 per share, Impinj trades at 61.7x 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
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
