Unprofitable companies face headwinds as they struggle to keep operating expenses under control. Some may be investing heavily, but the majority fail to convert spending into sustainable growth.

Finding the right unprofitable companies is difficult, which is why we started StockStory - to help you navigate the market. Keeping that in mind, here are three unprofitable companiesto steer clear of and a few better alternatives.

J. M. Smucker (SJM)

Trailing 12-Month GAAP Operating Margin: -7.7%

Best known for its fruit jams and spreads, J.M Smucker (NYSE: SJM) is a packaged foods company whose products span from peanut butter and coffee to pet food.

Why Are We Out on SJM?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 23.7 percentage points
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

J. M. Smucker is trading at $113.18 per share, or 11x forward P/E. Read our free research report to see why you should think twice about including SJM in your portfolio.

Malibu Boats (MBUU)

Trailing 12-Month GAAP Operating Margin: -1.2%

Founded in California in 1982, Malibu Boats (NASDAQ: MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.

Why Do We Think MBUU Will Underperform?

1. Number of boats sold has disappointed over the past two years, indicating weak demand for its offerings
2. Sales over the last five years were less profitable as its earnings per share fell by 17.4% annually while its revenue was flat
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $35.94 per share, Malibu Boats trades at 12.1x forward P/E. Dive into our free research report to see why there are better opportunities than MBUU.

Heartland Express (HTLD)

Trailing 12-Month GAAP Operating Margin: -3.6%

Founded by the son of a trucker, Heartland Express (NASDAQ: HTLD) offers full-truckload deliveries across the United States and Mexico.

Why Should You Dump HTLD?

1. Annual sales declines of 14.2% for the past two years show its products and services struggled to connect with the market during this cycle
2. Free cash flow margin shrank by 12.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Heartland Express’s stock price of $8.21 implies a valuation ratio of 7.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why HTLD doesn’t pass our bar.

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