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.
Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here are three cash-burning companies to steer clear of and a few better alternatives.
Krispy Kreme (DNUT)
Trailing 12-Month Free Cash Flow Margin: -6.4%
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ: DNUT) is one of the most beloved and well-known fast-food chains in the world.
Why Are We Out on DNUT?
- Earnings per share have contracted by 28.6% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- Negative free cash flow raises questions about the return timeline for its investments
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $3.98 per share, Krispy Kreme trades at 4.7x forward EV-to-EBITDA. If you’re considering DNUT for your portfolio, see our FREE research report to learn more.
Blink Charging (BLNK)
Trailing 12-Month Free Cash Flow Margin: -44.2%
One of the first EV charging companies to go public, Blink Charging (NASDAQ: BLNK) is a manufacturer, owner, operator, and provider of electric vehicle charging equipment and networked EV charging services.
Why Does BLNK Give Us Pause?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.9% annually over the last two years
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Blink Charging’s stock price of $1.27 implies a valuation ratio of 1.2x forward price-to-sales. Check out our free in-depth research report to learn more about why BLNK doesn’t pass our bar.
PAR Technology (PAR)
Trailing 12-Month Free Cash Flow Margin: -4.7%
Originally founded in 1968 as a defense contractor for the U.S. government, PAR Technology (NYSE: PAR) provides cloud-based software, payment processing, and hardware solutions that help restaurants manage everything from point-of-sale to customer loyalty programs.
Why Are We Wary of PAR?
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Push for growth has led to negative returns on capital, signaling value destruction
- 14× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
PAR Technology is trading at $34.14 per share, or 82.3x forward P/E. Read our free research report to see why you should think twice about including PAR in your portfolio.
High-Quality Stocks for All Market Conditions
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