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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. Keeping that in mind, here are three unprofitable companiesto steer clear of and a few better alternatives.

UiPath (PATH)

Trailing 12-Month GAAP Operating Margin: -11.4%

Started in 2005 in Romania as a tech outsourcing company, UiPath (NYSE:PATH) makes software that helps companies automate repetitive computer tasks.

Why Are We Hesitant About PATH?

1. Offerings struggled to generate meaningful interest as its average billings growth of 5.7% over the last year did not impress

2. Estimated sales growth of 6.4% for the next 12 months implies demand will slow from its three-year trend

3. Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue

At $10.22 per share, UiPath trades at 3.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PATH.

Peloton (PTON)

Trailing 12-Month GAAP Operating Margin: -9.3%

Started as a Kickstarter campaign, Peloton (NASDAQ: PTON) is a fitness technology company known for its at-home exercise equipment and interactive online workout classes.

Why Is PTON Risky?

1. Demand for its offerings was relatively low as its number of connected fitness subscribers has underwhelmed

2. Historical operating losses point to an inefficient cost structure

3. Cash burn makes us question whether it can achieve sustainable long-term growth

Peloton is trading at $5.27 per share, or 7.8x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why PTON doesn’t pass our bar.

PlayStudios (MYPS)

Trailing 12-Month GAAP Operating Margin: -11.4%

Founded by a team of former gaming industry executives, PlayStudios (NASDAQ:MYPS) offers free-to-play digital casino games.

Why Should You Dump MYPS?

1. Flat sales over the last two years suggest it must innovate and find new ways to grow

2. Persistent operating losses suggest the business manages its expenses poorly

3. Performance over the past four years shows its incremental sales were much less profitable, as its earnings per share fell by 41.4% annually

PlayStudios’s stock price of $1.23 implies a valuation ratio of 2.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including MYPS in your portfolio, it’s free.