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.
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 investing heavily to secure market share and two that may never reach the Promised Land.
Two Stocks to Sell:
Warner Bros. Discovery (WBD)
Trailing 12-Month GAAP Operating Margin: -4.6%
Formed from the merger of WarnerMedia and Discovery, Warner Bros. Discovery (NASDAQ: WBD) is a multinational media and entertainment company, offering television networks, streaming services, and film and television production.
Why Are We Out on WBD?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 14.7% for the last five years
- Poor free cash flow margin of 8.8% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Warner Bros. Discovery’s stock price of $27.37 implies a valuation ratio of 90,900x forward P/E. If you’re considering WBD for your portfolio, see our FREE research report to learn more.
Tandem Diabetes (TNDM)
Trailing 12-Month GAAP Operating Margin: -8.2%
With technology that automatically adjusts insulin delivery based on continuous glucose monitoring data, Tandem Diabetes Care (NASDAQ: TNDM) develops and manufactures automated insulin delivery systems that help people with diabetes manage their blood glucose levels.
Why Do We Pass on TNDM?
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 19.1% annually
- Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $16.57 per share, Tandem Diabetes trades at 17.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including TNDM in your portfolio.
One Stock to Buy:
Cloudflare (NET)
Trailing 12-Month GAAP Operating Margin: -9.3%
With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE: NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.
What Makes NET Stand Out?
- Billings have averaged 34.2% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
Cloudflare is trading at $271.90 per share, or 32.2x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
