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.
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. That said, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
Graphic Packaging Holding (GPK)
Trailing 12-Month Free Cash Flow Margin: -5.9%
Founded in 1991, Graphic Packaging (NYSE: GPK) is a provider of paper-based packaging solutions for a wide range of products.
Why Do We Avoid GPK?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Earnings per share have contracted by 5.7% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- 10.8 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Graphic Packaging Holding is trading at $21.10 per share, or 8.6x forward P/E. To fully understand why you should be careful with GPK, check out our full research report (it’s free).
NeoGenomics (NEO)
Trailing 12-Month Free Cash Flow Margin: -4.8%
Operating a network of CAP-accredited and CLIA-certified laboratories across the United States and United Kingdom, NeoGenomics (NASDAQ: NEO) provides specialized cancer diagnostic testing services, including genetic analysis, molecular testing, and pathology consultation for oncologists and healthcare providers.
Why Do We Think NEO Will Underperform?
- Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 12% annually
- Negative returns on capital show management lost money while trying to expand the business, and its decreasing returns suggest its historical profit centers are aging
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $7 per share, NeoGenomics trades at 31.5x forward P/E. Check out our free in-depth research report to learn more about why NEO doesn’t pass our bar.
Guardant Health (GH)
Trailing 12-Month Free Cash Flow Margin: -39.4%
Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ: GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.
Why Does GH Worry Us?
- Issuance of new shares over the last five years caused its earnings per share to fall by 23.7% annually while its revenue grew
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Guardant Health’s stock price of $49.10 implies a valuation ratio of 6.6x forward price-to-sales. Read our free research report to see why you should think twice about including GH in your portfolio.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% 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
