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 to avoid and some better opportunities instead.
Marqeta (MQ)
Trailing 12-Month GAAP Operating Margin: -4%
Powering the cards behind innovative fintech services like Block's Cash App, Marqeta (NASDAQ:MQ) provides a cloud-based platform that allows businesses to create customized payment card programs and process card transactions.
Why Are We Hesitant About MQ?
- Muted 6.3% annual revenue growth over the last two years shows its demand lagged behind its software peers
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Efficiency has decreased over the last year as its operating margin fell by 5.3 percentage points
Marqeta is trading at $17.74 per share, or 2.6x forward price-to-sales. To fully understand why you should be careful with MQ, check out our full research report (it’s free).
STAAR Surgical (STAA)
Trailing 12-Month GAAP Operating Margin: -9.1%
With over 2.5 million implants performed worldwide, STAAR Surgical (NASDAQ:STAA) designs and manufactures implantable lenses that correct vision problems without removing the eye's natural lens.
Why Do We Avoid STAA?
- Sales tumbled by 5.7% annually over the last two years, showing market trends are working against it during this cycle
- 26.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $25.58 per share, STAAR Surgical trades at 37.4x forward P/E. If you’re considering STAA for your portfolio, see our FREE research report to learn more.
Evolent Health (EVH)
Trailing 12-Month GAAP Operating Margin: -22.2%
Founded in 2011 to transform how healthcare is delivered to patients with complex needs, Evolent Health (NYSE:EVH) provides specialty care management services and technology solutions that help health plans and providers deliver better care for patients with complex conditions.
Why Does EVH Fall Short?
- Underwhelming average lives on platform over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Negative returns on capital show management lost money while trying to expand the business, and its falling returns suggest its earlier profit pools are drying up
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Evolent Health’s stock price of $5.79 implies a valuation ratio of 24.4x forward P/E. Check out our free in-depth research report to learn more about why EVH doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.