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.
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. That said, here are three unprofitable companiesto steer clear of and a few better alternatives.
Advance Auto Parts (AAP)
Trailing 12-Month GAAP Operating Margin: -10.5%
Founded in Virginia in 1932, Advance Auto Parts (NYSE: AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.
Why Do We Think AAP Will Underperform?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- 6.7 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $45.30 per share, Advance Auto Parts trades at 16x forward P/E. Read our free research report to see why you should think twice about including AAP in your portfolio.
10x Genomics (TXG)
Trailing 12-Month GAAP Operating Margin: -14.2%
Founded in 2012 by scientists seeking to overcome limitations in traditional biological research methods, 10x Genomics (NASDAQ: TXG) develops instruments, consumables, and software that enable researchers to analyze biological systems at single-cell resolution and spatial context.
Why Is TXG Not Exciting?
- Muted 4.2% annual revenue growth over the last two years shows its demand lagged behind its healthcare peers
- Cash-burning history makes us doubt the long-term viability of its business model
- Negative returns on capital show that some of its growth strategies have backfired
10x Genomics’s stock price of $22.68 implies a valuation ratio of 4.6x forward price-to-sales. To fully understand why you should be careful with TXG, check out our full research report (it’s free).
Cogent (CCOI)
Trailing 12-Month GAAP Operating Margin: -12.4%
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ: CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Why Does CCOI Give Us Pause?
- Performance surrounding its total connections has lagged its peers
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Cogent is trading at $23.76 per share, or 10.1x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CCOI.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
