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How to Invest in Stocks with Negative Earnings

The concept behind earning a profit seems relatively straightforward. Company profits are based on how much income it earns minus operating expenses. But the complexity of business operations means that even companies that have yet to realize a profit may still have a positive stock value. Investing in stocks that haven’t hit profitability yet can be a risky but rewarding opportunity.

However, traditional fundamental analysis won’t work with these types of stocks. Instead, investors must use different metrics and valuation tools to perform their due diligence and determine the intrinsic value for the stock’s price.

Be sure to check our Portfolio Management Channel to learn more about different portfolio rebalancing strategies.

How to Make the Adjustment for Negative Earnings

Projecting future earnings

Considerations to Keep in Mind

The Bottom Line