1 Cash-Burning Stock with Competitive Advantages and 2 to Steer Clear Of

Companies that burn cash at a rapid pace can run into serious trouble if they fail to secure funding. Without a clear path to profitability, these businesses risk dilution, mounting debt, or even bankruptcy.

Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here is one high-risk, high-reward company with the potential to scale into a market leader and two that could run into serious trouble.

Two Stocks to Sell:

Sleep Number (SNBR)

Trailing 12-Month Free Cash Flow Margin: -1.7%

Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ:SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.

Why Do We Avoid SNBR?

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. Estimated sales decline of 4.6% for the next 12 months implies an even more challenging demand environment
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

At $7.41 per share, Sleep Number trades at 1.7x forward EV-to-EBITDA. If you’re considering SNBR for your portfolio, see our FREE research report to learn more.

Lincoln Educational (LINC)

Trailing 12-Month Free Cash Flow Margin: -8.6%

Established in 1946, Lincoln Educational (NASDAQ:LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.

Why Should You Sell LINC?

1. Performance surrounding its enrolled students has lagged its peers
2. Negative free cash flow raises questions about the return timeline for its investments
3. Waning returns on capital imply its previous profit engines are losing steam

Lincoln Educational is trading at $23.75 per share, or 11.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than LINC.

One Stock to Watch:

Planet Labs (PL)

Trailing 12-Month Free Cash Flow Margin: -14.1%

Pioneering the concept of "agile aerospace" with hundreds of small but powerful satellites, Planet Labs (NYSE:PL) operates the world's largest fleet of Earth observation satellites, capturing daily images of our planet to provide insights on deforestation, agriculture, and climate change.

Why Are We Fans of PL?

1. Annual revenue growth of 21.3% over the last five years was superb and indicates its market share increased during this cycle
2. Additional sales over the last two years increased its profitability as the 27% annual growth in its earnings per share outpaced its revenue
3. Returns on capital are increasing as management’s prior bets are starting to bear fruit

Planet Labs’s stock price of $6.83 implies a valuation ratio of 7.2x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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