3 Cash-Burning Stocks We Find Risky

Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.

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 to avoid and some better opportunities instead.

The RealReal (REAL)

Trailing 12-Month Free Cash Flow Margin: -2.6%

Founded by consignment store aficionado Julie Wainwright, The RealReal (NASDAQ: REAL) is an online marketplace for buying and selling secondhand luxury goods.

Why Does REAL Fall Short?

1. Sales trends were unexciting over the last three years as its 4.1% annual growth was below the typical consumer internet company
2. Focus on expanding its platform came at the expense of monetization as its average revenue per user fell by 11.7% annually
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

The RealReal is trading at $10.69 per share, or 35.4x forward EV/EBITDA. Read our free research report to see why you should think twice about including REAL in your portfolio.

Custom Truck One Source (CTOS)

Trailing 12-Month Free Cash Flow Margin: -9.4%

Inspired by a family gas station, Custom Truck One Source (NYSE:CTOS) is a distributor of trucks and heavy equipment.

Why Does CTOS Give Us Pause?

1. 4.1% annual revenue growth over the last two years was slower than its industrials peers
2. Earnings per share have contracted by 52% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. 24.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

At $5.99 per share, Custom Truck One Source trades at 62.1x forward P/E. To fully understand why you should be careful with CTOS, check out our full research report (it’s free).

EVgo (EVGO)

Trailing 12-Month Free Cash Flow Margin: -28.4%

Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ:EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.

Why Does EVGO Worry Us?

1. Earnings per share have dipped by 30.6% annually over the past three years, which is concerning because stock prices follow EPS over the long term
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

EVgo’s stock price of $4.65 implies a valuation ratio of 21.2x forward EV-to-EBITDA. If you’re considering EVGO for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.