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.

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 are three unprofitable companiesto avoid and some better opportunities instead.

Redfin (RDFN)

Trailing 12-Month GAAP Operating Margin: -13.3%

Founded by a former medical school student, electrical engineer, and Amazon data engineer, Redfin (NASDAQ: RDFN) is a real estate company offering brokerage services through an online platform.

Why Do We Pass on RDFN?

1. Number of brokerage transactions has disappointed over the past two years, indicating weak demand for its offerings
2. Earnings per share fell by 9.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. EBITDA losses may force it to accept punitive lending terms or high-cost debt

Redfin’s stock price of $11.30 implies a valuation ratio of 86.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why RDFN doesn’t pass our bar.

Hertz (HTZ)

Trailing 12-Month GAAP Operating Margin: -11.4%

Started with a dozen Model T Fords, Hertz (NASDAQ: HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.

Why Are We Out on HTZ?

1. Underwhelming unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
2. Diminishing returns on capital suggest its earlier profit pools are drying up
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Hertz is trading at $7.44 per share, or 6.3x forward EV-to-EBITDA. If you’re considering HTZ for your portfolio, see our FREE research report to learn more.

Alight (ALIT)

Trailing 12-Month GAAP Operating Margin: -2.5%

Born from a corporate spinoff in 2017 to focus on employee experience technology, Alight (NYSE: ALIT) provides human capital management solutions that help companies administer employee benefits, payroll, and workforce management systems.

Why Do We Think ALIT Will Underperform?

1. Sales tumbled by 1.9% annually over the last five years, showing market trends are working against its favor during this cycle
2. Earnings per share have dipped by 3.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. ROIC of 0.6% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging

At $5.76 per share, Alight trades at 9.1x forward P/E. To fully understand why you should be careful with ALIT, check out our full research report (it’s free).

Stocks We Like More

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Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. 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).

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