Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.

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.

Camping World (CWH)

Trailing 12-Month Free Cash Flow Margin: -2.7%

Founded in 1966 as a single recreational vehicle (RV) dealership, Camping World (NYSE: CWH) still sells RVs along with boats and general merchandise for outdoor activities.

Why Are We Out on CWH?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Camping World is trading at $11.17 per share, or 15.1x forward P/E. If you’re considering CWH for your portfolio, see our FREE research report to learn more.

Sleep Number (SNBR)

Trailing 12-Month Free Cash Flow Margin: -3.3%

Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ: SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.

Why Do We Think SNBR Will Underperform?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Sales were less profitable over the last three years as its earnings per share fell by 51.4% annually, worse than its revenue declines
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

At $5.54 per share, Sleep Number trades at 1.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SNBR doesn’t pass our bar.

AerSale (ASLE)

Trailing 12-Month Free Cash Flow Margin: -1.9%

Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ: ASLE) delivers full-service support to mid-life commercial aircraft.

Why Should You Dump ASLE?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

AerSale’s stock price of $6.36 implies a valuation ratio of 10.7x forward P/E. Dive into our free research report to see why there are better opportunities than ASLE.

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