Companies that burn cash at a rapid pace can run into serious trouble if they fail to secure funding. Without a clear path to profitability, these businesses risk dilution, mounting debt, or even bankruptcy.
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 is one high-risk, high-reward company investing aggressively to carve out a leadership position and two to leave off your radar.
Two Stocks to Sell:
Lincoln Educational (LINC)
Trailing 12-Month Free Cash Flow Margin: -13.4%
Established in 1946, Lincoln Educational (NASDAQ: LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.
Why Do We Pass on LINC?
- Performance surrounding its enrolled students has lagged its peers
- Negative free cash flow raises questions about the return timeline for its investments
- Eroding returns on capital suggest its historical profit centers are aging
Lincoln Educational’s stock price of $20.96 implies a valuation ratio of 10.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LINC in your portfolio.
Meritage Homes (MTH)
Trailing 12-Month Free Cash Flow Margin: -4%
Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE: MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.
Why Is MTH Risky?
- Backlog has dropped by 36.5% on average over the past two years, suggesting it’s losing orders as competition picks up
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.6 percentage points
- Diminishing returns on capital suggest its earlier profit pools are drying up
Meritage Homes is trading at $76.31 per share, or 8.8x forward P/E. If you’re considering MTH for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Coca-Cola (KO)
Trailing 12-Month Free Cash Flow Margin: -1.5%
A pioneer and behemoth in carbonated soft drinks, Coca-Cola (NYSE: KO) is a storied beverage company best known for its flagship soda.
Why Do We Like KO?
- Enormous revenue base of $47.23 billion provides significant negotiating leverage in retail partnerships
- Differentiated product offerings are difficult to replicate at scale and result in a best-in-class gross margin of 61.1%
- Excellent operating margin of 25.1% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage
At $66.32 per share, Coca-Cola trades at 21.4x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out 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 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-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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