1 Unprofitable Stock Worth Your Attention and 2 Facing Challenges

Barchart·12/01/2025 05:12:18

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

Two Stocks to Sell:

Bandwidth (BAND)

Trailing 12-Month GAAP Operating Margin: -1.7%

Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ:BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.

Why Is BAND Not Exciting?

1. Annual revenue growth of 12.9% over the last two years was below our standards for the software sector
2. Gross margin of 38.8% is way below its competitors, leaving less money to invest in areas like marketing and R&D
3. Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage

Bandwidth’s stock price of $14.24 implies a valuation ratio of 0.5x forward price-to-sales. To fully understand why you should be careful with BAND, check out our full research report (it’s free for active Edge members).

Purple (PRPL)

Trailing 12-Month GAAP Operating Margin: -10.6%

Founded by two brothers, Purple (NASDAQ:PRPL) creates sleep and home comfort products such as mattresses, pillows, and bedding accessories.

Why Do We Avoid PRPL?

1. Annual sales declines of 5.3% for the past five years show its products and services struggled to connect with the market
2. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

At $0.79 per share, Purple trades at 5.5x forward EV-to-EBITDA. If you’re considering PRPL for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

Datadog (DDOG)

Trailing 12-Month GAAP Operating Margin: -1.4%

Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) provides a software platform that helps organizations monitor and secure their cloud applications, infrastructure, and services.

Why Should You Buy DDOG?

1. Ability to secure long-term commitments with customers is evident in its 26.5% ARR growth over the last year
2. Projected revenue growth of 21.7% for the next 12 months suggests its momentum from the last two years will persist
3. Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently

Datadog is trading at $159.20 per share, or 14.8x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

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Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. 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).

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