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.

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 is one unprofitable company that could turn today’s losses into long-term gains and two best left off your radar.

Two Stocks to Sell:

Enovis (ENOV)

Trailing 12-Month GAAP Operating Margin: -36.8%

With a focus on helping patients regain or maintain their natural motion, Enovis (NYSE:ENOV) develops and manufactures medical devices for orthopedic care, from injury prevention and pain management to joint replacement and rehabilitation.

Why Do We Pass on ENOV?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 8.7% annually over the last five years

2. Negative returns on capital show management lost money while trying to expand the business, and its shrinking returns suggest its past profit sources are losing steam

3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $34.21 per share, Enovis trades at 11.1x forward price-to-earnings. To fully understand why you should be careful with ENOV, check out our full research report (it’s free) .

Fastly (FSLY)

Trailing 12-Month GAAP Operating Margin: -30.9%

Founded in 2011, Fastly (NYSE:FSLY) provides content delivery and edge cloud computing services, enabling enterprises and developers to deliver fast, secure, and scalable digital content and experiences.

Why Do We Avoid FSLY?

1. Sales trends were unexciting over the last three years as its 15.3% annual growth was below the typical software company

2. Gross margin of 54.4% is way below its competitors, leaving less money to invest in areas like marketing and R&D

3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Fastly’s stock price of $5.81 implies a valuation ratio of 1.4x forward price-to-sales. Check out our free in-depth research report to learn more about why FSLY doesn’t pass our bar .

One Stock to Watch:

Warby Parker (WRBY)

Trailing 12-Month GAAP Operating Margin: -3.9%

Founded in 2010, Warby Parker (NYSE:WRBY) designs, manufactures, and sells eyewear, including prescription glasses, sunglasses, and contact lenses, through its e-commerce platform and physical retail locations.