3 Cash-Burning Stocks with Questionable Fundamentals

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

Not all companies are worth the risk, and that’s why we built StockStory - to help you spot the red flags. Keeping that in mind, here are three cash-burning companies to steer clear of and a few better alternatives.

Magnachip (MX)

Trailing 12-Month Free Cash Flow Margin: -23.7%

With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE:MX) is a provider of analog and mixed-signal semiconductors.

Why Should You Sell MX?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 17.2% annually over the last five years
2. Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 16.5%
3. Cash burn has widened over the last five years, making us question whether it can reliably generate shareholder value

Magnachip is trading at $2.30 per share, or 0.5x forward price-to-sales. Check out our free in-depth research report to learn more about why MX doesn’t pass our bar.

Altice (ATUS)

Trailing 12-Month Free Cash Flow Margin: -3.1%

Based in Long Island City, Altice USA (NYSE:ATUS) is a telecommunications company offering cable, internet, telephone, and television services across the United States.

Why Is ATUS Risky?

1. Performance surrounding its broadband subscribers has lagged its peers
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. 8× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Altice’s stock price of $1.92 implies a valuation ratio of 0.3x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than ATUS.

Lucid (LCID)

Trailing 12-Month Free Cash Flow Margin: -317%

Founded by a former Tesla Vice President, Lucid Group (NASDAQ:LCID) designs, manufactures, and sells luxury electric vehicles with long-range capabilities.

Why Is LCID Not Exciting?

1. Negative 148% gross margin means it loses money on every sale and must pivot or scale quickly to survive
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

At $17.25 per share, Lucid trades at 2.5x forward price-to-sales. Read our free research report to see why you should think twice about including LCID in your portfolio.

High-Quality Stocks for All Market Conditions

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