3 Cash-Burning Stocks That Fall Short

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.

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 to avoid and some better opportunities instead.

Vishay Intertechnology (VSH)

Trailing 12-Month Free Cash Flow Margin: -7.3%

Named after the founder's ancestral village in present-day Lithuania, Vishay Intertechnology (NYSE:VSH) manufactures simple chips and electronic components that are building blocks of virtually all types of electronic devices.

Why Do We Avoid VSH?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 7.3% annually over the last two years
2. Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 21.1%
3. 16 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

Vishay Intertechnology is trading at $16.00 per share, or 31.2x forward P/E. To fully understand why you should be careful with VSH, check out our full research report (it’s free).

Burlington (BURL)

Trailing 12-Month Free Cash Flow Margin: -3.2%

Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE:BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.

Why Do We Think Twice About BURL?

1. Annual sales growth of 9.3% over the last three years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
2. 5.1 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
3. ROIC of 9% reflects management’s challenges in identifying attractive investment opportunities

Burlington’s stock price of $309.04 implies a valuation ratio of 28.9x forward P/E. Check out our free in-depth research report to learn more about why BURL doesn’t pass our bar.

3D Systems (DDD)

Trailing 12-Month Free Cash Flow Margin: -24.1%

Founded by the inventor of stereolithography, 3D Systems (NYSE:DDD) engineers, manufactures, and sells 3D printers and other related products to the aerospace, automotive, healthcare, and consumer goods industries.

Why Do We Pass on DDD?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 6.7% annually over the last five years
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

At $2.37 per share, 3D Systems trades at 0.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than DDD.

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