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 avoid and some better opportunities instead.

Sabre (SABR)

Trailing 12-Month Free Cash Flow Margin: -6.9%

Originally a division of American Airlines, Sabre (NASDAQ: SABR) is a technology provider for the global travel and tourism industry.

Why Should You Sell SABR?

1. Sales trends were unexciting over the last five years as its 15.7% annual growth was below the typical consumer discretionary company
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Sabre’s stock price of $1.93 implies a valuation ratio of 7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SABR.

Shoals (SHLS)

Trailing 12-Month Free Cash Flow Margin: -3.4%

Started in Huntsville, Alabama, Shoals (NASDAQ: SHLS) designs and manufactures products that make solar energy systems work more efficiently.

Why Are We Hesitant About SHLS?

1. Annual sales declines of 1.4% for the past two years show its products and services struggled to connect with the market during this cycle
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Eroding returns on capital suggest its historical profit centers are aging

Shoals is trading at $7.25 per share, or 17.2x forward P/E. To fully understand why you should be careful with SHLS, check out our full research report (it’s free).

Integra LifeSciences (IART)

Trailing 12-Month Free Cash Flow Margin: -1.9%

Founded in 1989 as a pioneer in regenerative medicine technology, Integra LifeSciences (NASDAQ: IART) develops and manufactures medical technologies for neurosurgery, wound care, and surgical reconstruction, including regenerative tissue products and surgical instruments.

Why Do We Think IART Will Underperform?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 19 percentage points
3. High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate

At $11.16 per share, Integra LifeSciences trades at 4.7x forward P/E. Read our free research report to see why you should think twice about including IART in your portfolio.

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