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.
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. Keeping that in mind, here is one unprofitable company investing heavily to secure market share and two best left off your radar.
Two Stocks to Sell:
Sportsman's Warehouse (SPWH)
Trailing 12-Month GAAP Operating Margin: -1.3%
A go-to destination for individuals passionate about hunting, fishing, camping, hiking, shooting sports, and more, Sportsman's Warehouse (NASDAQ: SPWH) is an American specialty retailer offering a diverse range of active gear, equipment, and apparel.
Why Are We Out on SPWH?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Historical operating losses point to an inefficient cost structure
- 15× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Sportsman's Warehouse is trading at $1.99 per share, or 2.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SPWH in your portfolio.
1-800-FLOWERS (FLWS)
Trailing 12-Month GAAP Operating Margin: -2.8%
Founded in 1976, 1-800-FLOWERS (NASDAQ: FLWS) is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.
Why Do We Steer Clear of FLWS?
- Products and services have few die-hard fans as sales have declined by 9.9% annually over the last two years
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 24.2% annually
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $4.78 per share, 1-800-FLOWERS trades at 15.8x forward P/E. If you’re considering FLWS for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Arlo Technologies (ARLO)
Trailing 12-Month GAAP Operating Margin: -4.7%
Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.
Why Are We Positive On ARLO?
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 193% over the last two years outstripped its revenue performance
- Free cash flow margin grew by 19.7 percentage points over the last five years, giving the company more chips to play with
Arlo Technologies’s stock price of $13.42 implies a valuation ratio of 21.3x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 176% over the last five years.
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.
