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.
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 is one unprofitable company that could turn today’s losses into long-term gains and two that may never reach the Promised Land.
Two Stocks to Sell:
Bandwidth (BAND)
Trailing 12-Month GAAP Operating Margin: -1.9%
Started in 1999 by David Morken who was later joined by Henry Kaestner as co-founder in 2001, Bandwidth (NASDAQ:BAND) provides thousands of customers with a software platform that uses its own global network to provide phone numbers, voice, and text connectivity.
Why Do We Think BAND Will Underperform?
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Revenue increased by 13.9% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
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Estimated sales growth of 2.8% for the next 12 months implies demand will slow from its three-year trend
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Gross margin of 38% is way below its competitors, leaving less money to invest in areas like marketing and R&D
Bandwidth is trading at $14.59 per share, or 0.6x forward price-to-sales. Read our free research report to see why you should think twice about including BAND in your portfolio, it’s free.
Kura Sushi (KRUS)
Trailing 12-Month GAAP Operating Margin: -5%
Known for its conveyor belt that transports dishes to diners, Kura Sushi (NASDAQ:KRUS) is a chain of sushi restaurants serving traditional Japanese fare with a touch of modernity and technology.
Why Are We Cautious About KRUS?
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Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 4.6 percentage points
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Historically negative EPS raises concerns for risk-averse investors and makes its earnings potential harder to gauge
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Cash-burning history makes us doubt the long-term viability of its business model
At $82.30 per share, Kura Sushi trades at 1,261.2x forward P/E. Dive into our free research report to see why there are better opportunities than KRUS.
One Stock to Buy:
Atlassian (TEAM)
Trailing 12-Month GAAP Operating Margin: -3.4%
Founded by Australian co-CEOs Mike Cannon-Brookes and Scott Farquhar in 2002, Atlassian (NASDAQ:TEAM) provides software as a service that makes it easier for large teams of software developers to manage projects, especially in software development.
Why Will TEAM Outperform?
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Billings growth has averaged 14.7% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
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Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
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TEAM is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Atlassian’s stock price of $198.78 implies a valuation ratio of 8.8x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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 Strong Momentum Stocks for this week. 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-micro-cap company Kadant (+351% 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
