3 Unprofitable Stocks That Fall Short

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.

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 are three unprofitable companiesthat don’t make the cut and some better opportunities instead.

J. M. Smucker (SJM)

Trailing 12-Month GAAP Operating Margin: -7.7%

Best known for its fruit jams and spreads, J.M Smucker (NYSE:SJM) is a packaged foods company whose products span from peanut butter and coffee to pet food.

Why Do We Avoid SJM?

1. Flat unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
2. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 11.4 percentage points
3. Underwhelming 0.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam

J. M. Smucker is trading at $109.80 per share, or 11x forward P/E. Dive into our free research report to see why there are better opportunities than SJM.

Sphere Entertainment (SPHR)

Trailing 12-Month GAAP Operating Margin: -12.6%

Famous for its viral Las Vegas Sphere venue, Sphere Entertainment (NYSE:SPHR) hosts live entertainment events and distributes content across various media platforms.

Why Do We Steer Clear of SPHR?

1. Lackluster 18.1% annual revenue growth over the last five years indicates the company is losing ground to competitors
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 7.5% for the last two years
3. Negative earnings profile makes it challenging to secure favorable financing terms from lenders

At $114.08 per share, Sphere Entertainment trades at 20.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SPHR doesn’t pass our bar.

Lumen (LUMN)

Trailing 12-Month GAAP Operating Margin: -6.5%

With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE:LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.

Why Do We Think LUMN Will Underperform?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 9.7% annually over the last five years
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 15.8% annually, worse than its revenue
3. Free cash flow margin shrank by 10.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Lumen’s stock price of $6.64 implies a valuation ratio of 7.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LUMN in your portfolio.

Stocks We Like 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.

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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.