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

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 steer clear of and a few better alternatives.

Huntington Ingalls (HII)

Trailing 12-Month Free Cash Flow Margin: -1.3%

Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE: HII) develops marine vessels and their mission systems and maintenance services.

Why Should You Dump HII?

1. Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 1.8% for the past two years was weak
2. 9.2 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
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Huntington Ingalls’s stock price of $259.99 implies a valuation ratio of 18.2x forward P/E. If you’re considering HII for your portfolio, see our FREE research report to learn more.

SolarEdge (SEDG)

Trailing 12-Month Free Cash Flow Margin: -16.8%

Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.

Why Is SEDG Risky?

1. Performance surrounding its megawatts shipped has lagged its peers
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

SolarEdge is trading at $25.45 per share, or 1.3x forward price-to-sales. Read our free research report to see why you should think twice about including SEDG in your portfolio.

Lemonade (LMND)

Trailing 12-Month Free Cash Flow Margin: -6.8%

Built on the principle of giving back unused premiums to charitable causes selected by policyholders, Lemonade (NYSE: LMND) is a technology-driven insurance company that offers homeowners, renters, pet, car, and life insurance through an AI-powered digital platform.

Why Do We Think Twice About LMND?

1. Earnings per share lagged its peers over the last four years as they only grew by 6.3% annually
2. Annual book value per share declines of 184% for the past five years show its capital management struggled during this cycle
3. Negative return on equity shows that some of its growth strategies have backfired

At $38 per share, Lemonade trades at 6.2x forward P/B. Dive into our free research report to see why there are better opportunities than LMND.

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 Exlservice (+354% 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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