Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.
Just because a company is spending heavily doesn’t mean it’s on the right track, and StockStory is here to separate the winners from the losers. Keeping that in mind, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
GoPro (GPRO)
Trailing 12-Month Free Cash Flow Margin: -10.7%
Known for sponsoring extreme athletes, GoPro (NASDAQ: GPRO) is a camera company known for its POV videos and editing software.
Why Do We Pass on GPRO?
- Annual revenue declines of 3.9% over the last five years indicate problems with its market positioning
- Waning returns on capital imply its previous profit engines are losing steam
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $2.15 per share, GoPro trades at 0.5x trailing 12-month price-to-sales. Read our free research report to see why you should think twice about including GPRO in your portfolio.
Beyond Meat (BYND)
Trailing 12-Month Free Cash Flow Margin: -41.6%
A pioneer at the forefront of the plant-based protein revolution, Beyond Meat (NASDAQ: BYND) is a food company specializing in alternatives to traditional meat products.
Why Is BYND Risky?
- Declining unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 18.5 percentage points
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Beyond Meat is trading at $0.70 per share, or 0.2x forward price-to-sales. If you’re considering BYND for your portfolio, see our FREE research report to learn more.
U-Haul (UHAL)
Trailing 12-Month Free Cash Flow Margin: -30.6%
Founded by a husband and wife duo, U-Haul (NYSE: UHAL) is a provider of rental trucks and storage facilities.
Why Do We Think UHAL Will Underperform?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
U-Haul’s stock price of $55.54 implies a valuation ratio of 1.8x trailing 12-month price-to-sales. Check out our free in-depth research report to learn more about why UHAL doesn’t pass our bar.
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