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. That said, here is one unprofitable company investing heavily to secure market share and two that could struggle to survive.
Two Stocks to Sell:
DraftKings (DKNG)
Trailing 12-Month GAAP Operating Margin: -5.6%
Getting its start in daily fantasy sports, DraftKings (NASDAQ: DKNG) is a digital sports entertainment and gaming company.
Why Are We Wary of DKNG?
- Demand for its offerings was relatively low as its number of monthly unique players has underwhelmed
- Historical operating margin losses point to an inefficient cost structure
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
DraftKings’s stock price of $32.60 implies a valuation ratio of 31.7x forward P/E. Read our free research report to see why you should think twice about including DKNG in your portfolio.
Tilly's (TLYS)
Trailing 12-Month GAAP Operating Margin: -4.6%
With an emphasis on skate and surf culture, Tilly’s (NYSE: TLYS) is a specialty retailer that sells clothing, footwear, and accessories geared towards fashion-forward teens and young adults.
Why Do We Avoid TLYS?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Cash-burning history makes us doubt the long-term viability of its business model
- Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly
At $1.68 per share, Tilly's trades at 0.1x forward price-to-sales. If you’re considering TLYS for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Cloudflare (NET)
Trailing 12-Month GAAP Operating Margin: -9.6%
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.
Why Do We Love NET?
- Billings growth has averaged 34.2% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Notable projected revenue growth of 27.6% for the next 12 months hints at market share gains
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
Cloudflare is trading at $184 per share, or 25x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
