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.
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 that don’t make the cut and some better opportunities instead.
WeightWatchers (WW)
Trailing 12-Month Free Cash Flow Margin: -2.2%
Known by many for its old cable television commercials, WeightWatchers (NASDAQ:WW) is a wellness company offering a range of products and services promoting weight loss and healthy habits.
Why Should You Sell WW?
- Number of members has disappointed over the past two years, indicating weak demand for its offerings
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $0.66 per share, WeightWatchers trades at 0.5x forward EV-to-EBITDA. If you’re considering WW for your portfolio, see our FREE research report to learn more.
Driven Brands (DRVN)
Trailing 12-Month Free Cash Flow Margin: -1.9%
With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ:DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.
Why Are We Wary of DRVN?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Driven Brands’s stock price of $17.57 implies a valuation ratio of 13.5x forward P/E. Dive into our free research report to see why there are better opportunities than DRVN.
Ball (BALL)
Trailing 12-Month Free Cash Flow Margin: -3.1%
Started with a $200 loan in 1880, Ball (NYSE:BLL) manufactures aluminum packaging for beverages, personal care, and household products as well as aerospace systems and other technologies.
Why Is BALL Risky?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.9%
- Free cash flow margin shrank by 5.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Ball is trading at $51.22 per share, or 14.5x forward P/E. Check out our free in-depth research report to learn more about why BALL doesn’t pass our bar.
Stocks That Overcame Trump’s 2018 Tariffs
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.