Running at a loss can be a red flag. Many of these businesses face mounting challenges as competition increases and funding becomes harder to secure.
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 companiesto steer clear of and a few better alternatives.
IPG Photonics (IPGP)
Trailing 12-Month GAAP Operating Margin: -23.7%
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ:IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Why Do We Think IPGP Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.3% annually over the last five years
- Operating margin declined by 42.4 percentage points over the last five years as its sales cratered
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
IPG Photonics is trading at $76.01 per share, or 46.8x forward P/E. Check out our free in-depth research report to learn more about why IPGP doesn’t pass our bar.
Estée Lauder (EL)
Trailing 12-Month GAAP Operating Margin: -4.2%
Named after its founder, who was an entrepreneurial woman from New York with a passion for skincare, Estée Lauder (NYSE:EL) is a one-stop beauty shop with products in skincare, fragrance, makeup, sun protection, and men’s grooming.
Why Are We Out on EL?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Inability to adjust its cost structure while its revenue declined over the last year led to a 12.1 percentage point drop in the company’s operating margin
- Sales were less profitable over the last three years as its earnings per share fell by 35.3% annually, worse than its revenue declines
At $89.20 per share, Estée Lauder trades at 40.8x forward P/E. To fully understand why you should be careful with EL, check out our full research report (it’s free).
SolarEdge (SEDG)
Trailing 12-Month GAAP Operating Margin: -179%
Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.
Why Do We Pass on SEDG?
- Sluggish trends in its megawatts shipped suggest customers aren’t adopting its solutions as quickly as the company hoped
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
SolarEdge’s stock price of $31.25 implies a valuation ratio of 1.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than SEDG.
Stocks We Like More
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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-small-cap company Comfort Systems (+782% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.