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 may never reach the Promised Land.

Two Stocks to Sell:

Allegro MicroSystems (ALGM)

Trailing 12-Month GAAP Operating Margin: -1.6%

The result of a spinoff from Sanken in Japan, Allegro MicroSystems (NASDAQ: ALGM) is a designer of power management chips and distance sensors used in electric vehicles and data centers.

Why Do We Avoid ALGM?

1. Annual sales declines of 14.2% for the past two years show its products and services struggled to connect with the market during this cycle
2. Already-low operating margin of 6.1% fell over the last five years, and the smaller profit dollars make it harder to react to unexpected market developments
3. Incremental sales over the last five years were much less profitable as its earnings per share fell by 17.2% annually while its revenue grew

Allegro MicroSystems’s stock price of $29.95 implies a valuation ratio of 49.9x forward P/E. Dive into our free research report to see why there are better opportunities than ALGM.

Skillz (SKLZ)

Trailing 12-Month GAAP Operating Margin: -70.6%

Taking a new twist at video gaming, Skillz (NYSE: SKLZ) offers developers a platform to create and distribute mobile games where players can pay fees to compete for cash prizes.

Why Do We Pass on SKLZ?

1. Value proposition isn’t resonating strongly as its paying monthly active users averaged 24.5% drops over the last two years
2. Cash burn has widened over the last few years, making us question whether it can reliably generate shareholder value
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

At $7.21 per share, Skillz trades at 1.3x forward price-to-gross profit. To fully understand why you should be careful with SKLZ, check out our full research report (it’s free).

One Stock to Watch:

Snowflake (SNOW)

Trailing 12-Month GAAP Operating Margin: -37.4%

Named after the unique architecture of its data warehouse which resembles a snowflake pattern, Snowflake (NYSE: SNOW) provides a cloud-based data platform that enables organizations to consolidate, analyze, and share data across multiple cloud providers.

Why Does SNOW Stand Out?

1. Billings growth has averaged 31.2% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
2. Customers use its software daily and increase their spending every year, as seen in its 126% net revenue retention rate
3. Expected revenue growth of 24.5% for the next year suggests its market share will rise

Snowflake is trading at $233.99 per share, or 15.3x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. 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

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