Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.
Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. Keeping that in mind, here are three cash-burning companies to avoid and some better opportunities instead.
C3.ai (AI)
Trailing 12-Month Free Cash Flow Margin: -11.4%
Founded in 2009 by enterprise software veteran Tom Seibel, C3.ai (NYSE:AI) provides software that makes it easy for organizations to add artificial intelligence technology to their applications.
Why Do We Think Twice About AI?
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Sales trends were unexciting over the last three years as its 15.5% annual growth was below the typical software company
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Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
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Suboptimal cost structure is highlighted by its history of operating margin losses
C3.ai’s stock price of $24.60 implies a valuation ratio of 7.1x forward price-to-sales. Check out our free in-depth research report to learn more about why AI doesn’t pass our bar.
3D Systems (DDD)
Trailing 12-Month Free Cash Flow Margin: -15.9%
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 Is DDD Risky?
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Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.9% annually over the last five years
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Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
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Short cash runway increases the probability of a capital raise that dilutes existing shareholders
3D Systems is trading at $1.53 per share, or 0.5x forward price-to-sales. If you’re considering DDD for your portfolio, see our FREE research report to learn more.
Sphere Entertainment (SPHR)
Trailing 12-Month Free Cash Flow Margin: -5.3%
Famous for its viral Las Vegas Sphere venue, Sphere Entertainment (NYSE:SPHR) hosts live entertainment events and distributes content across various media platforms.
Why Do We Think SPHR Will Underperform?
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Sales trends were unexciting over the last five years as its 2.4% annual growth was below the typical consumer discretionary company
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Earnings per share fell by 7.1% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
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Cash burn makes us question whether it can achieve sustainable long-term growth
At $41.80 per share, Sphere Entertainment trades at 8.3x forward EV-to-EBITDA. To fully understand why you should be careful with SPHR, check out our full research report (it’s free).
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 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 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
