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 are three unprofitable companiesto steer clear of and a few better alternatives.

Stitch Fix (SFIX)

Trailing 12-Month GAAP Operating Margin: -5.5%

One of the original subscription box companies, Stitch Fix (NASDAQ: SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.

Why Do We Think SFIX Will Underperform?

1. Sluggish trends in its active clients suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 24.5% annually, worse than its revenue
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Stitch Fix is trading at $5.15 per share, or 13.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SFIX doesn’t pass our bar.

Coursera (COUR)

Trailing 12-Month GAAP Operating Margin: -13.9%

Founded by two Stanford University computer science professors, Coursera (NYSE: COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.

Why Does COUR Give Us Pause?

1. Decision to emphasize platform growth over monetization has contributed to 5.2% annual declines in its average revenue per customer
2. Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its three-year trend
3. Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas

At $8.80 per share, Coursera trades at 24.6x forward EV/EBITDA. Read our free research report to see why you should think twice about including COUR in your portfolio.

Masimo (MASI)

Trailing 12-Month GAAP Operating Margin: -13.4%

Founded in 1989 to solve the "unsolvable problem" of accurate pulse oximetry during patient movement, Masimo (NASDAQ: MASI) develops and manufactures noninvasive patient monitoring technologies, including its breakthrough pulse oximetry systems that accurately measure blood oxygen levels even during patient movement.

Why Should You Sell MASI?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Forecasted revenue decline of 6.9% for the upcoming 12 months implies demand will fall even further
3. Waning returns on capital imply its previous profit engines are losing steam

Masimo’s stock price of $167 implies a valuation ratio of 31x forward P/E. To fully understand why you should be careful with MASI, check out our full research report (it’s free).

Stocks We Like 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 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.