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. Keeping that in mind, here are three unprofitable companiesto avoid and some better opportunities instead.
C3.ai (AI)
Trailing 12-Month GAAP Operating Margin: -86.6%
Founded in 2009 by enterprise software veteran Tom Seibel, C3.ai (NYSE: AI) provides software that makes it easy for organizations to add artificial intelligence technology to their applications.
Why Does AI Give Us Pause?
- 16.4% annual revenue growth over the last three years was slower than its software peers
- Gross margin of 59.9% is way below its competitors, leaving less money to invest in areas like marketing and R&D
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
C3.ai’s stock price of $22.55 implies a valuation ratio of 6.6x forward price-to-sales. If you’re considering AI for your portfolio, see our FREE research report to learn more.
Zeta (ZETA)
Trailing 12-Month GAAP Operating Margin: -4.5%
Co-founded by former Apple CEO John Sculley, Zeta Global (NYSE: ZETA) provides software and data analytics tools that help companies market their products to billions of customers.
Why Are We Hesitant About ZETA?
- Net revenue retention rate of 97.1% shows it has a tough time retaining customers
- Gross margin of 60.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Rapid expansion strategy came at the expense of operating profitability
Zeta is trading at $13.57 per share, or 2.3x forward price-to-sales. To fully understand why you should be careful with ZETA, check out our full research report (it’s free).
Compass (COMP)
Trailing 12-Month GAAP Operating Margin: -2.7%
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE: COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Does COMP Worry Us?
- Annual revenue declines of 3.3% over the last two years indicate problems with its market positioning
- Sluggish trends in its principal agents suggest customers aren’t adopting its solutions as quickly as the company hoped
- Persistent operating losses suggest the business manages its expenses poorly
At $7.88 per share, Compass trades at 61.2x forward P/E. Dive into our free research report to see why there are better opportunities than COMP.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 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.
