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 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:
Under Armour (UAA)
Trailing 12-Month Free Cash Flow Margin: -4.4%
Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE: UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.
Why Should You Dump UAA?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Poor free cash flow margin of -0.2% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Under Armour’s stock price of $6.86 implies a valuation ratio of 19.6x forward P/E. To fully understand why you should be careful with UAA, check out our full research report (it’s free).
Mister Car Wash (MCW)
Trailing 12-Month Free Cash Flow Margin: -2.5%
Formerly known as Hotshine Holdings, Mister Car Wash (NYSE: MCW) offers car washes across the United States through its conveyorized service.
Why Do We Think MCW Will Underperform?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- 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
Mister Car Wash is trading at $6.28 per share, or 14x forward P/E. Read our free research report to see why you should think twice about including MCW in your portfolio.
One Stock to Buy:
AAON (AAON)
Trailing 12-Month Free Cash Flow Margin: -9.3%
Backed by two million square feet of lab testing space, AAON (NASDAQ: AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.
Why Is AAON a Good Business?
- Annual revenue growth of 20.7% over the past five years was outstanding, reflecting market share gains this cycle
- Projected revenue growth of 15.7% for the next 12 months is above its two-year trend, pointing to accelerating demand
- ROIC punches in at 20.7%, illustrating management’s expertise in identifying profitable investments
At $78.50 per share, AAON trades at 32.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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-micro-cap company Kadant (+351% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
