Companies that burn cash at a rapid pace can run into serious trouble if they fail to secure funding. Without a clear path to profitability, these businesses risk dilution, mounting debt, or even bankruptcy.
Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
fuboTV (FUBO)
Trailing 12-Month Free Cash Flow Margin: -9.4%
Originally launched as a soccer streaming platform, fuboTV (NYSE: FUBO) is a video streaming service specializing in live sports, news, and entertainment content.
Why Does FUBO Worry Us?
- Uptick in domestic subscribers indicates the company’s underlying demand is healthy
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Negative free cash flow raises questions about the return timeline for its investments
fuboTV is trading at $8.71 per share, or 1,888.7x forward P/E. Read our free research report to see why you should think twice about including FUBO in your portfolio.
Sabre (SABR)
Trailing 12-Month Free Cash Flow Margin: -9.4%
Originally a division of American Airlines, Sabre (NASDAQ: SABR) is a technology provider for the global travel and tourism industry.
Why Do We Avoid SABR?
- Performance surrounding its total bookings has lagged its peers
- Cash burn makes us question whether it can achieve sustainable long-term growth
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Sabre’s stock price of $1.76 implies a valuation ratio of 6.9x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SABR.
3D Systems (DDD)
Trailing 12-Month Free Cash Flow Margin: -18.2%
Founded by the inventor of stereolithography, 3D Systems (NYSE: DDD) engineers, manufactures, and sells 3D printers and other related products to the aerospace, automotive, healthcare, and consumer goods industries.
Why Do We Pass on DDD?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 7.3% annually over the last five years
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $3.15 per share, 3D Systems trades at 1.2x forward price-to-sales. Check out our free in-depth research report to learn more about why DDD doesn’t pass our bar.
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