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.

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 with the potential to become an industry leader and two that may never reach the Promised Land.

Two Stocks to Sell:

DNOW (DNOW)

Trailing 12-Month GAAP Operating Margin: -2.7%

Spun off from National Oilwell Varco, DNOW (NYSE: DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.

Why Are We Wary of DNOW?

1. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
2. Issuance of new shares over the last two years caused its earnings per share to fall by 3.7% annually while its revenue grew
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

DNOW’s stock price of $12.45 implies a valuation ratio of 19.3x forward P/E. To fully understand why you should be careful with DNOW, check out our full research report (it’s free).

Neogen (NEOG)

Trailing 12-Month GAAP Operating Margin: -73.1%

Founded in 1981 and operating at the intersection of food safety and animal health, Neogen (NASDAQ: NEOG) develops and manufactures diagnostic tests and related products to detect dangerous substances in food and pharmaceuticals for animal health.

Why Are We Out on NEOG?

1. Sales tumbled by 3.2% annually over the last two years, showing market trends are working against its favor during this cycle
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly

Neogen is trading at $9.41 per share, or 39.3x forward P/E. Dive into our free research report to see why there are better opportunities than NEOG.

One Stock to Watch:

IonQ (IONQ)

Trailing 12-Month GAAP Operating Margin: -487%

Founded by quantum physics pioneers from the University of Maryland and Duke University in 2015, IonQ (NYSE: IONQ) develops quantum computers that process information using trapped ions to solve complex computational problems beyond the capabilities of traditional computers.

Why Could IONQ Be a Winner?

1. Annual revenue growth of 143% over the past two years was outstanding, reflecting market share gains this cycle
2. Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
3. Adjusted operating margin improvement of 1,226.6 percentage points over the last five years demonstrates its ability to scale efficiently

At $29.98 per share, IonQ trades at 45x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

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 (+1,326% between June 2020 and June 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.