There are a lot of things to consider before choosing a stock. Ideally, you want to invest in a company that is profitable, or at least on the path to profitability. You also want its business model to have both long-term demand and growth opportunities.

Two hot stocks that don't fit the bill for these stock-buying requirements are Beyond Meat (BYND 2.46%) and Carvana (CVNA 5.76%). Here's a closer look at why I wouldn't touch these companies with a 10-foot pole, and where I'd put my money instead.

Beyond Meat

When I first heard about the plant-based alternative meat company Beyond Meat, I loved the idea of having a healthier, more eco-friendly option within the food industry. Clearly, I wasn't the only one. Its IPO in 2019 was incredibly strong, with its share prices climbing as much as 240% in the months following. But now, nearly four years later, the company is still wildly unprofitable, and it doesn't seem like things are improving quickly enough to keep the boat from sinking.

In its latest full-year earnings for 2022, the company lost over $366 million. Its revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) also fell compared to last year. It's not uncommon for a young company like Beyond Meat to operate at a net loss in its first few years, but its losing streak isn't improving. Shrinking consumer demand for its products has led to high inventory, forcing the company to cut its product prices to move it. It's also facing rising costs amid high inflation, supply chain issues, and higher cost of borrowing with rising interest rates.

Unsurprisingly, the company relies heavily on debt to float its operations, and now the ability to pay back its debt is in question. I do believe there could be long-term growth opportunities for Beyond Meat, but I'm not sure the company's foundation is stable enough to overcome today's economic and operational pressures. That's why I'm steering clear of this company.

Carvana

Online car-buying company Carvana is another great example of when a vision simply doesn't meet reality. The idea behind Carvana's business model, to buy and sell used cars virtually, sounds appealing. But in its nearly 10-year tenure as a company, it has yet to figure out how to do this profitably. Its business model also hasn't been adopted by the mainstream.

Carvana has been bleeding money for years, and its latest 2022 full-year earnings came in much worse than expected. The stock's net loss per share was $15.74 -- a loss 865% greater than last year's. Its EBITDA margins are also thinning, and its debt-to-equity ratio is rising rapidly. This puts the company at risk for maintaining its debt obligations and has prompted Carvana to take drastic cost-saving measures, but it may not be enough to save the company.

Its losses last year were largely from macroeconomic pressures like higher debt costs and waning demand for used cars as inflation and rising interest rates weigh on consumers. But macroeconomic challenges aren't the root of the problem. Even when used-car demand and prices soared due to pandemic-related supply chain issues, Carvana still wasn't able to turn a profit.

Its business model may have too much room for pricing errors and an inability to accurately predict inventory and demand. This factor, combined with its lack of profitability and dangerous debt levels, makes it a stock to stay away from.

Where I'd put my money instead

Airbnb (ABNB -0.79%) is a stock that doesn't just have an appealing vision -- it's a stock that is wildly profitable and has massive long-term growth opportunities. This leading short-term rental platform is defying most young growth stock stories by delivering incredible year-over-year growth since its IPO in 2021.

The fourth quarter of 2022 was its most profitable in history, with its EBITDA jumping by 72% compared to last year. Its revenue for the full year were up 40%, and 2022 marked its first full year of positive net income. High demand for domestic and international short-term rentals also helped the company achieve its stellar growth. And while Airbnb is predicting that travel demand will slow slightly in 2023, the company still has massive long-term growth opportunities. 

It continues rolling out new features to improve the booking and rental experience for guests and hosts, helping create return customers and attract new hosts. It's created new services like Airbnb experiences, and its latest earnings report hinted that something new outside of its core services could be coming. The company is flush with cash and its debt-to-equity ratio is positive. That's much better than Carvana and Beyond Meat, which both have a negative debt-to-equity ratio.

Chart showing Airbnb's debt-to-equity ratio currently higher than Beyond Meat's and Carvana's.

ABNB Debt to Equity Ratio data by YCharts

I also truly believe in the vision of Airbnb and consider the stock an opportunity, since market saturation is nowhere near capacity. The stock's pricing is somewhat elevated compared to its closest competitors, but it's a reasonable price for a stock that's performing as strongly as Airbnb and that has this many growth opportunities.