1 unprofitable stock with exciting potential and 2 that underwhelm

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. Keeping that in mind, here is one unprofitable company that could turn today’s losses into long-term gains and two that may never reach the Promised Land.

Two stocks to sell:

10x Genomics (TXG)

Trailing 12-Month GAAP Operating Margin: -14.3%

Founded in 2012 by scientists seeking to overcome limitations in traditional biological research methods, 10x Genomics (NASDAQ:TXG) develops instruments, consumables, and software that enable researchers to analyze biological systems at single-cell resolution and spatial context.

Why Are We Out on TXG?

1. Sales tumbled by 1.2% annually over the last two years, showing market trends are working against it during this cycle

2. Smaller revenue base of $616.9 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy

3. Negative returns on capital show management lost money while trying to expand the business

At $69.32 per share, 10x Genomics trades at 15.2x forward price-to-sales. Read our free research report to see why you should think twice about including TXG in your portfolio, it’s free.

ProFrac (ACDC)

Trailing 12-Month GAAP Operating Margin: -15%

Operating one of the largest electric-powered fracturing fleets in North America, ProFrac (NASDAQ:ACDC) provides hydraulic fracturing services that help oil and gas companies extract hydrocarbons from underground shale formations.

Why Are We Bearish on ACDC?

1. Costly operations and weak unit economics result in an inferior gross margin of 32.1% that must be offset through higher production volumes

2. Costs have risen faster than its revenue over the last five years, causing its EBITDA margin to decline by 14.9 percentage points

3. Poor free cash flow margin of 3.7% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

ProFrac’s stock price of $3.87 implies a valuation ratio of 6.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why ACDC doesn’t pass our bar.

One stock to watch:

SentinelOne (S)

Trailing 12-Month GAAP Operating Margin: -29.5%

Built on the principle of “fighting machine with machine,” SentinelOne (NYSE:S) provides an AI-powered cybersecurity platform that autonomously prevents, detects, and responds to threats across endpoints, cloud workloads, and identity systems.