While some companies burn cash to fuel expansion, others struggle to turn spending into sustainable growth. A high cash burn rate without a strong balance sheet can leave investors exposed to significant downside.

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 are three cash-burning companies to avoid and some better opportunities instead.

Sabre (SABR)

Trailing 12-Month Free Cash Flow Margin: -9.4%

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

Why Are We Wary of SABR?

1. Sluggish trends in its central reservation system transactions suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Sabre is trading at $1.80 per share, or 7.7x forward P/E. If you’re considering SABR for your portfolio, see our FREE research report to learn more.

Quest Resource (QRHC)

Trailing 12-Month Free Cash Flow Margin: -1.1%

Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ: QRHC) is a provider of waste and recycling services.

Why Are We Out on QRHC?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.4% annually over the last two years
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. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

At $2.00 per share, Quest Resource trades at 141x forward P/E. Read our free research report to see why you should think twice about including QRHC in your portfolio.

Myriad Genetics (MYGN)

Trailing 12-Month Free Cash Flow Margin: -4.5%

Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ: MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.

Why Should You Sell MYGN?

1. Annual revenue growth of 5.5% over the last five years was below our standards for the healthcare sector
2. Push for growth has led to negative returns on capital, signaling value destruction, and its decreasing returns suggest its historical profit centers are aging
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Myriad Genetics’s stock price of $7.84 implies a valuation ratio of 184x forward P/E. To fully understand why you should be careful with MYGN, check out our full research report (it’s free for active Edge members).

Stocks We Like More

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