While many technology and artificial intelligence stocks have seen highs this year, Snowflake (NYSE: SNOW) is going in the opposite direction. With a decline of 43% year to date, the cloud computing stock has lagged far behind the market – the S&P500 rose 17% this year.

Snowflake’s business has struggled with several problems this year. The company was embroiled in a data breach and investors weren’t thrilled about a CEO change that occurred months earlier – and the stock has yet to recover.

But since Snowflake shares have been a bit more stable lately and recent results haven’t been too bad in terms of growth, could the stock have potentially bottomed out? Is now a good time to add Snowflake to your portfolio?

Recent results suggest the data breach is not hurting business

On August 21, Snowflake released its results for the second quarter, which ran through the end of July. The company’s revenue for the quarter was $868.8 million, up 29% year over year. Although the company’s growth rate continues to decline steadily, there is no major decline, suggesting that it is facing increasing headwinds due to the data leak that occurred earlier this year.

Snowflake CEO Sridhar Ramaswamy told CNBC’s Jim Cramer that despite all the negative headlines, concerns about the data breach were overblown. “These headlines, and they are, have not really impacted our core business with existing or new customers.”

While it’s positive that the breach did not negatively impact the company’s data storage business, Snowflake’s growth rate continues to slow, and that may not sit well with growth-oriented investors.

Snowflake’s bigger problem might be the bottom line

A growth rate of nearly 30% could make Snowflake a good stock – if it weren’t for its brutal losses. In the last quarter, the company’s net loss was $317.8 million, which is 40% more than the $227.3 million in the same period last year.

I find the CEO’s response to slowing growth particularly troubling. In his interview, Ramaswamy told Cramer, “We are investing in our future, whether it’s in development or in sales to sell the product better.” The last part of that quote worries me: Like many other executives, Ramaswamy’s response is to hire more salespeople and spend more money on sales to grow the business.

Currently, the company spends on sales and marketing at 46% of its revenue. And research and development accounts for another 50%. With revenue shares that high, it will be incredibly difficult for Snowflake to ever become profitable, especially if the solution to growing the company is to spend more on sales and marketing.

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Snowflake shares could fall even further

Although Snowflake’s revenues didn’t grow exponentially last quarter, that doesn’t mean the company is on a good path forward. If the growth rate continues to deteriorate (and it could happen amid a recession), there’s little reason to invest in the company right now, as its high expenses mean its losses could also get even bigger in the coming quarters.

Without any hope of profitability, I wouldn’t take a chance on this tech stock. Although the valuation is lower, it still trades at 12 times sales and almost 10 times book value. Snowflake trades at a steep premium, and given the challenges the company is currently facing, that’s hard to justify.

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David Jagielski does not own any stocks mentioned. The Motley Fool owns Snowflake and recommends these stocks. The Motley Fool has a disclosure policy.

Has Snowflake Stock Bottomed? was originally published by The Motley Fool