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

Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here are three cash-burning companies to steer clear of and a few better alternatives.

Boeing (BA)

Trailing 12-Month Free Cash Flow Margin: -2.1%

One of the companies that forms a duopoly in the commercial aircraft market, Boeing (NYSE: BA) develops, manufactures, and services commercial airplanes, defense products, and space systems.

Why Are We Cautious About BA?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 7.2% over the last two years was below our standards for the industrials sector
2. Persistent operating margin losses suggest the business manages its expenses poorly
3. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

Boeing’s stock price of $209.31 implies a valuation ratio of 830.6x forward P/E. If you’re considering BA for your portfolio, see our FREE research report to learn more.

MDU Resources (MDU)

Trailing 12-Month Free Cash Flow Margin: -15.8%

Founded to provide electricity to towns in Minnesota, MDU Resources (NYSE: MDU) provides products and services in the utilities and construction materials industries.

Why Do We Avoid MDU?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 19.5% annually over the last five years
2. Earnings per share have dipped by 15.9% annually over the past four years, which is concerning because stock prices follow EPS over the long term
3. Free cash flow margin dropped by 13 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $20.86 per share, MDU Resources trades at 21.8x forward P/E. To fully understand why you should be careful with MDU, check out our full research report (it’s free).

Purple (PRPL)

Trailing 12-Month Free Cash Flow Margin: -6.2%

Founded by two brothers, Purple (NASDAQ: PRPL) creates sleep and home comfort products such as mattresses, pillows, and bedding accessories.

Why Do We Think PRPL Will Underperform?

1. Annual revenue declines of 5.3% over the last five years indicate problems with its market positioning
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Purple is trading at $0.71 per share, or 17.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why PRPL doesn’t pass our bar.

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