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 is one high-risk, high-reward company with the potential to scale into a market leader and two that may struggle to stay afloat.
Two Stocks to Sell:
Norwegian Cruise Line (NCLH)
Trailing 12-Month Free Cash Flow Margin: -5.3%
With amenities like a full go-kart race track built into its ships, Norwegian Cruise Line (NYSE: NCLH) is a premier global cruise company.
Why Are We Cautious About NCLH?
- Demand for its offerings was relatively low as its number of passenger cruise days has underwhelmed
- Negative free cash flow raises questions about the return timeline for its investments
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $25.39 per share, Norwegian Cruise Line trades at 11.3x forward P/E. Check out our free in-depth research report to learn more about why NCLH doesn’t pass our bar.
Cogent (CCOI)
Trailing 12-Month Free Cash Flow Margin: -23.2%
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ: CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Why Are We Wary of CCOI?
- Free cash flow margin shrank by 39.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital imply its previous profit engines are losing steam
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Cogent’s stock price of $40 implies a valuation ratio of 5.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CCOI.
One Stock to Watch:
SoundHound AI (SOUN)
Trailing 12-Month Free Cash Flow Margin: -85.8%
Born from the idea that machines should understand human speech as naturally as people do, SoundHound AI (NASDAQ: SOUN) develops voice recognition and conversational intelligence technology that enables businesses to integrate voice assistants into their products and services.
Why Is SOUN on Our Radar?
- Average billings growth of 202% over the last year enhances its liquidity and shows there is steady demand for its products
- Expected revenue growth of 42.4% for the next year suggests its market share will rise
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
SoundHound AI is trading at $17.27 per share, or 37.1x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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 Kadant (+351% 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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