3 Cash-Burning Stocks with Warning Signs

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. That said, here are three cash-burning companies to steer clear of and a few better alternatives.

Lovesac (LOVE)

Trailing 12-Month Free Cash Flow Margin: -1.4%

Known for its oversized, premium beanbags, Lovesac (NASDAQ:LOVE) is a specialty furniture brand selling modular furniture.

Why Do We Pass on LOVE?

1. Muted 1.6% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Lovesac is trading at $13.87 per share, or 54.3x forward P/E. Read our free research report to see why you should think twice about including LOVE in your portfolio.

Matthews (MATW)

Trailing 12-Month Free Cash Flow Margin: -4%

Originally a death care company, Matthews International (NASDAQ:MATW) is a diversified company offering ceremonial services, brand solutions and industrial technologies.

Why Do We Steer Clear of MATW?

1. Flat sales over the last five years suggest it must innovate and find new ways to grow
2. Low free cash flow margin of -0.8% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Stagnant returns on capital show management has failed to improve the company’s business quality

At $24.44 per share, Matthews trades at 21.8x forward P/E. To fully understand why you should be careful with MATW, check out our full research report (it’s free for active Edge members).

Tilray (TLRY)

Trailing 12-Month Free Cash Flow Margin: -10.7%

Founded in 2013, Tilray Brands (NASDAQ:TLRY) engages in cannabis research, cultivation, and distribution, offering a range of medical and recreational cannabis products, hemp-based foods, and alcoholic beverages.

Why Should You Sell TLRY?

1. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 248.3 percentage points
2. Long-term business health is up for debate as its cash burn has increased over the last year
3. Push for growth has led to negative returns on capital, signaling value destruction, and its decreasing returns suggest its historical profit centers are aging

Tilray’s stock price of $7.23 implies a valuation ratio of 112.3x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why TLRY doesn’t pass our bar.

Stocks We Like More

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-small-cap company Comfort Systems (+782% 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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