Fitbit (NYSE:FIT) has burned many investors over the past two years. Shares of the wearable device maker hit almost $50 in July 2015, but today they're worth less than $6. Fitbit's collapse is mainly attributed to competitors in the wearables market torpedoing its sales growth.

After posting 149% sales growth in 2015, Fitbit's growth slowed to 17% in 2016. Analysts expect its revenue to plunge 26% this year as it cedes market share to aggressive rivals like Xiaomi and Apple (NASDAQ:AAPL).

Fitbit's Blaze.

The Fitbit Blaze. Source: Fitbit.

But Fitbit's bottom line growth looks even worse. After posting a solid full-year profit in fiscal 2015, Fitbit posted a non-GAAP loss of $0.12 per share in 2016. Analysts expect that loss to widen to $0.35 per share this year, and remain in the red in 2018. Its GAAP losses are even wider.

At this point, investors are likely wondering if Fitbit will ever post a profit again. Let's take a look at how Fitbit lost its mojo, and how it plans to get back on the right track.

How Fitbit's profits vanished

Fitbit's main problem is that its revenue growth slowed down but its operating expenses kept rising.

FIT Revenue (TTM) Chart

Source: YCharts

Last quarter, Fitbit's revenue fell 41% annually to $298.9 million and its non-GAAP gross margin contracted from 46.6% to 40%, but its GAAP operating expenses only declined 2.5% to $209.7 million. Fitbit needs to launch new products to generate fresh revenue growth, but it can't do so without boosting R&D and marketing expenses.

This catch-22 cycle should continue for the foreseeable future as Fitbit acquires other companies (like the assets of smartwatch maker Pebble and high-end smartwatch maker Vector) and develops new devices, like its upcoming smartwatch.

In the meantime, Fitbit's current generation of devices -- which include the Blaze, Chart 2, Alta, and Alta HR -- continue ceding market share to their competitors. IDC's latest wearables report found that Fitbit's global market share fell from 23.2% to 12.3% between the first quarters of 2016 and 2017, which caused it to drop from first to third place behind Xiaomi and Apple.

How bad could things get?

Many companies bounce back from unprofitable periods, but only if they don't run out of cash. In that regard, Fitbit remains in good shape. Its cash and equivalents rose 24% annually to $374.3 million last quarter, and it doesn't have any debt.

Unfortunately, its free cash flow dove into negative territory over the past year, and that situation probably won't improve as Fitbit tries to spend its way out of its current rut.

FIT Free Cash Flow (TTM) Chart

Source: YCharts

For the full year, Fitbit expects its non-GAAP free cash flow to remain between negative $50 and $100 million. Those numbers are dismal, but they don't indicate that Fitbit will run out of money, take on debt, or resort to follow-on offerings to raise cash. Of course, that could still change if Fitbit tries to turn its business around with a shopping spree.

Does Fitbit think it can become profitable again?

Fitbit expects to finish the year with a net loss, and hasn't offered a clear path toward profitability yet. During the first quarter conference call, CEO James Park noted that the company made "difficult decisions in terms of cost structure" and "changes in the executive team" to return Fitbit "to growth and profitability by improving quality, increasing speed to market of new product offerings, and bolstering efficiency and execution."

But Fitbit seems to be dropping the ball in those areas. Its best shot at a comeback lies with its new full-featured smartwatch, but the device was already delayed from a spring launch to the fall due to production issues. Several members of the team reportedly resigned, and the team has struggled with GPS and waterproofing problems. Developer response to its app store was also tepid, and it reportedly lost a potential partnership with Spotify.

Park admits that the smartwatch will be a "make or break" device for Fitbit, but claims that the device remains "on track" for a fall launch. Unfortunately, that will also pit the device against the Apple Watch 3 -- which means that Fitbit's new device might be considered outdated before it arrives.

So when will Fitbit start making money?

Fitbit's main rivals are either selling their devices at paper-thin margins to expand their ecosystems, like Xiaomi; or selling them as luxury devices like Apple. As other rivals like Garmin and Samsung further saturate the market, Fitbit's devices no longer stand out.

Simply put, Fitbit won't achieve profitability anytime soon, if ever again. The company is spending a lot of money to generate very little growth, and that dilemma can't be rectified overnight.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.