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.
Finding the right unprofitable companies is difficult, which is why we started StockStory — to help you navigate the market. That said, here are three unprofitable companies that don’t make the cut and some better opportunities instead.
Target Hospitality (TH)
Trailing 12-Month GAAP Operating Margin: -11.1%
Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ: TH) is a provider of specialty workforce lodging accommodations and services.
Why Do We Avoid TH?
- Number of utilized beds has disappointed over the past two years, indicating weak demand for its offerings
- Low free cash flow margin of 7.9% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $19.35 per share, Target Hospitality trades at 36.8x forward P/E. Read our free research report to see why you should think twice about including TH in your portfolio.
Sphere Entertainment (SPHR)
Trailing 12-Month GAAP Operating Margin: -6.1%
Famous for its viral Las Vegas Sphere venue, Sphere Entertainment (NYSE: SPHR) hosts live entertainment events and distributes content across various media platforms.
Why Are We Bearish on SPHR?
- Lackluster 10.8% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.7 percentage points
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
Sphere Entertainment’s stock price of $149.24 implies a valuation ratio of 17.4x forward EV-to-EBITDA. To fully understand why you should be careful with SPHR, check out our full research report (it’s free).
Fastly (FSLY)
Trailing 12-Month GAAP Operating Margin: -12%
Taking its name from the core advantage it delivers to customers, Fastly (NASDAQ: FSLY) operates an edge cloud platform that processes, secures, and delivers web content as close to end users as possible, enabling faster digital experiences.
Why Does FSLY Fall Short?
- 13.7% annual revenue growth over the last two years was slower than its software peers
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 61.5%
- Suboptimal cost structure is highlighted by its history of operating margin losses
Fastly is trading at $23.67 per share, or 4.9x forward price-to-sales. If you’re considering FSLY for your portfolio, see our FREE research report to learn more.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
