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.

Finding the right unprofitable companies is difficult, which is why we started StockStory - to help you navigate the market. That said, here is one unprofitable company with the potential to become an industry leader and two that may never reach the Promised Land.

Two Stocks to Sell:

Q2 Holdings (QTWO)

Trailing 12-Month GAAP Operating Margin: -3.6%

Founded in 2004 by Hank Seale, Q2 (NYSE: QTWO) offers software-as-a-service that enables small banks to provide online banking and consumer lending services to their clients.

Why Does QTWO Worry Us?

1. Revenue increased by 11.8% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
2. Sky-high servicing costs result in an inferior gross margin of 51.8% that must be offset through increased usage
3. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.4 percentage points over the next year

Q2 Holdings is trading at $88.93 per share, or 7.2x forward price-to-sales. If you’re considering QTWO for your portfolio, see our FREE research report to learn more.

Medifast (MED)

Trailing 12-Month GAAP Operating Margin: -1.2%

Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE: MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.

Why Is MED Risky?

1. Annual sales declines of 30.3% for the past three years show its products struggled to connect with the market
2. Operating margin declined by 10.2 percentage points over the last year as its sales cratered
3. Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term

Medifast’s stock price of $13.70 implies a valuation ratio of 0.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MED.

One Stock to Buy:

Samsara (IOT)

Trailing 12-Month GAAP Operating Margin: -11.8%

One of the few public companies where famed investor Marc Andreessen is a Board member, Samsara (NYSE: IOT) provides software and hardware to track industrial equipment, assets, and fleets.

Why Are We Bullish on IOT?

1. ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
2. Notable projected revenue growth of 22.1% for the next 12 months hints at market share gains
3. Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient

At $37.95 per share, Samsara trades at 13.1x forward price-to-sales. 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 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 Comfort Systems (+782% 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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