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.
A lack of profits can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here is one unprofitable company that could turn today’s losses into long-term gains and two that may never reach the Promised Land.
Two Stocks to Sell:
Elastic (ESTC)
Trailing 12-Month GAAP Operating Margin: -1.9%
Built on the powerful open-source Elasticsearch technology that powers search functionality for thousands of websites worldwide, Elastic (NYSE: ESTC) provides a search and AI platform that helps organizations find insights from their data, monitor applications, and protect against security threats.
Why Do We Think Twice About ESTC?
- Estimated sales growth of 14.6% for the next 12 months implies demand will slow from its two-year trend
- Customers can hit the ground running with its software, meaning the company can quickly ramp up their spending
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
At $76.88 per share, Elastic trades at 4x forward price-to-sales. To fully understand why you should be careful with ESTC, check out our full research report (it’s free).
Baldwin Insurance Group (BWIN)
Trailing 12-Month GAAP Operating Margin: -6.9%
Rebranded from BRP Group in May 2024, Baldwin Insurance Group (NASDAQ: BWIN) is an independent insurance distribution company that provides tailored insurance, risk management, and employee benefits solutions to businesses and individuals.
Why Is BWIN Not Exciting?
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 8.2 percentage points
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -1% for the last five years
- 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Baldwin Insurance Group’s stock price of $31.01 implies a valuation ratio of 13.1x forward P/E. Dive into our free research report to see why there are better opportunities than BWIN.
One Stock to Buy:
JFrog (FROG)
Trailing 12-Month GAAP Operating Margin: -11.5%
Named after the amphibian that continuously evolves from egg to tadpole to adult, JFrog (NASDAQ: FROG) provides a platform that helps organizations securely create, store, manage, and distribute software packages across any system.
Why Are We Bullish on FROG?
- Billings growth has averaged 31.5% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Strong free cash flow margin of 28.3% enables it to reinvest or return capital consistently
JFrog is trading at $86.27 per share, or 14.9x forward price-to-sales. Is now the time to initiate a position? See for yourself in our in-depth 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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
