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 avoid and some better opportunities instead.
Tilly's (TLYS)
Trailing 12-Month Free Cash Flow Margin: -4.8%
With an emphasis on skate and surf culture, Tilly’s (NYSE: TLYS) is a specialty retailer that sells clothing, footwear, and accessories geared towards fashion-forward teens and young adults.
Why Is TLYS Risky?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Tilly’s stock price of $1.19 implies a valuation ratio of 0.1x forward price-to-sales. Read our free research report to see why you should think twice about including TLYS in your portfolio.
GATX (GATX)
Trailing 12-Month Free Cash Flow Margin: -31.2%
Originally founded to ship beer, GATX (NYSE: GATX) provides leasing and management services for railcars and other transportation assets globally.
Why Are We Wary of GATX?
- Sluggish trends in its active railcars suggest customers aren’t adopting its solutions as quickly as the company hoped
- Negative free cash flow raises questions about the return timeline for its investments
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $159.25 per share, GATX trades at 16.4x forward P/E. Dive into our free research report to see why there are better opportunities than GATX.
Dave & Buster's (PLAY)
Trailing 12-Month Free Cash Flow Margin: -14.8%
Founded by a former game parlor and bar operator, Dave & Buster’s (NASDAQ: PLAY) operates a chain of arcades providing immersive entertainment experiences.
Why Should You Sell PLAY?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Returns on capital haven’t budged, indicating management couldn’t drive additional value creation
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Dave & Buster's is trading at $15.91 per share, or 12.5x forward P/E. Check out our free in-depth research report to learn more about why PLAY doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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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