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.
Not all companies are worth the risk, and that’s why we built StockStory - to help you spot the red flags. That said, here are three cash-burning companies to steer clear of and a few better alternatives.
Health Catalyst (HCAT)
Trailing 12-Month Free Cash Flow Margin: -4.5%
Founded by healthcare professionals Tom Burton and Steve Barlow in 2008, Health Catalyst (NASDAQ:HCAT) provides data and analytics technology to healthcare organizations, enabling them to improve care and lower costs.
Why Are We Cautious About HCAT?
- Muted 7% annual revenue growth over the last three years shows its demand lagged behind its software peers
- Gross margin of 45.9% reflects its high servicing costs
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
Health Catalyst is trading at $3.74 per share, or 0.7x forward price-to-sales. Read our free research report to see why you should think twice about including HCAT in your portfolio.
Skillz (SKLZ)
Trailing 12-Month Free Cash Flow Margin: -19.1%
Taking a new twist at video gaming, Skillz (NYSE:SKLZ) offers developers a platform to create and distribute mobile games where players can pay fees to compete for cash prizes.
Why Should You Sell SKLZ?
- Intense competition is diverting traffic from its platform as its paying monthly active users fell by 33.6% annually
- Historical EBITDA margin losses point to an inefficient cost structure
- Cash-burning history makes us doubt the long-term viability of its business model
Skillz’s stock price of $6.79 implies a valuation ratio of 1.3x forward price-to-gross profit. If you’re considering SKLZ for your portfolio, see our FREE research report to learn more.
Boeing (BA)
Trailing 12-Month Free Cash Flow Margin: -18.2%
One of the companies that forms a duopoly in the commercial aircraft market, Boeing (NYSE:BA) develops, manufactures, and services commercial airplanes, defense products, and space systems.
Why Should You Dump BA?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Negative free cash flow raises questions about the return timeline for its investments
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $229.77 per share, Boeing trades at 32.6x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BA doesn’t pass our bar.
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-micro-cap company Tecnoglass (+1,754% 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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