3 Cash-Burning Stocks We Think Twice About

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?

1. Annual revenue declines of 3.9% over the last five years indicate problems with its market positioning
2. Waning returns on capital imply its previous profit engines are losing steam
3. 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?

1. Declining unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
2. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 18.5 percentage points
3. 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?

1. Flat sales over the last two years suggest it must find different ways to grow during this cycle
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. 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.

High-Quality Stocks for All Market Conditions

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