3 Cash-Burning Stocks We Find Risky

While some companies burn cash to fuel expansion, others struggle to turn spending into sustainable growth. A high cash burn rate without a strong balance sheet can leave investors exposed to significant downside.

Not all companies are worth the risk, and that’s why we built StockStory - to help you spot the red flags. That said, here are three cash-burning companies to avoid and some better opportunities instead.

Tilly's (TLYS)

Trailing 12-Month Free Cash Flow Margin: -4.8%

With an emphasis on skate and surf culture, Tilly’s (NYSE:TLYS) is a specialty retailer that sells clothing, footwear, and accessories geared towards fashion-forward teens and young adults.

Why Is TLYS Risky?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Tilly’s stock price of $1.19 implies a valuation ratio of 0.1x forward price-to-sales. Read our free research report to see why you should think twice about including TLYS in your portfolio.

GATX (GATX)

Trailing 12-Month Free Cash Flow Margin: -31.2%

Originally founded to ship beer, GATX (NYSE:GATX) provides leasing and management services for railcars and other transportation assets globally.

Why Are We Wary of GATX?

1. Sluggish trends in its active railcars suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Negative free cash flow raises questions about the return timeline for its investments
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

At $159.25 per share, GATX trades at 16.4x forward P/E. Dive into our free research report to see why there are better opportunities than GATX.

Dave & Buster's (PLAY)

Trailing 12-Month Free Cash Flow Margin: -14.8%

Founded by a former game parlor and bar operator, Dave & Buster’s (NASDAQ:PLAY) operates a chain of arcades providing immersive entertainment experiences.

Why Should You Sell PLAY?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Returns on capital haven’t budged, indicating management couldn’t drive additional value creation
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Dave & Buster's is trading at $15.91 per share, or 12.5x forward P/E. Check out our free in-depth research report to learn more about why PLAY doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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

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