3 Unprofitable Stocks with Questionable Fundamentals
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.
Finding the right unprofitable companies is difficult, which is why we started StockStory — to help you navigate the market. That said, here are three unprofitable companiesto avoid and some better opportunities instead.
Funko (FNKO)
Trailing 12-Month GAAP Operating Margin: -3.5%
Boasting partnerships with media franchises like Marvel and One Piece, Funko (NASDAQ:FNKO) is a company specializing in creating and distributing licensed pop culture collectibles.
Why Are We Out on FNKO?
- Muted 5.4% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2.4% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $5.66 per share, Funko trades at 222x forward P/E. Read our free research report to see why you should think twice about including FNKO in your portfolio.
Perma-Fix (PESI)
Trailing 12-Month GAAP Operating Margin: -26.3%
Tackling hazardous waste challenges since 1990, Perma-Fix (NASDAQ:PESI) provides environmental waste treatment services.
Why Should You Sell PESI?
- Annual sales declines of 10.7% for the past five years show its products and services struggled to connect with the market during this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 26.9 percentage points
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Perma-Fix’s stock price of $15.58 implies a valuation ratio of 3.3x forward price-to-sales. If you’re considering PESI for your portfolio, see our FREE research report to learn more.
WEBTOON (WBTN)
Trailing 12-Month GAAP Operating Margin: -3.3%
Pioneering a vertical-scrolling format optimized for mobile devices, WEBTOON Entertainment (NASDAQ:WBTN) operates a global platform where creators publish serialized web-comics and web-novels that users can read in bite-sized episodes.
Why Do We Think Twice About WBTN?
- Sluggish trends in its monthly active users suggest customers aren’t adopting its solutions as quickly as the company hoped
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 73.5% annually
- Low free cash flow margin of -0.6% for the last four years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
WEBTOON is trading at $10.81 per share, or 98.8x forward P/E. To fully understand why you should be careful with WBTN, check out our full research report (it’s free).
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.
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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.