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

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 with the potential to scale into a market leader and two that may struggle to stay afloat.

Two Stocks to Sell:

Lennar (LEN)

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

One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.

Why Do We Steer Clear of LEN?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 19.2% decline in its backlog
2. Incremental sales over the last two years were much less profitable as its earnings per share fell by 15.2% annually while its revenue grew
3. Free cash flow margin dropped by 11.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $130.66 per share, Lennar trades at 14.5x forward P/E. Read our free research report to see why you should think twice about including LEN in your portfolio.

NeoGenomics (NEO)

Trailing 12-Month Free Cash Flow Margin: -2.4%

Operating a network of CAP-accredited and CLIA-certified laboratories across the United States and United Kingdom, NeoGenomics (NASDAQ: NEO) provides specialized cancer diagnostic testing services, including genetic analysis, molecular testing, and pathology consultation for oncologists and healthcare providers.

Why Is NEO Risky?

1. Modest revenue base of $709.2 million gives it less fixed cost leverage and fewer distribution channels than larger companies
2. Negative returns on capital show that some of its growth strategies have backfired
3. High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

NeoGenomics’s stock price of $12.42 implies a valuation ratio of 75.4x forward P/E. Check out our free in-depth research report to learn more about why NEO doesn’t pass our bar.

One Stock to Watch:

SmartRent (SMRT)

Trailing 12-Month Free Cash Flow Margin: -30.4%

Founded by an employee at a real estate rental company, SmartRent (NYSE: SMRT) provides smart home devices and software for multifamily residential properties, single-family rental homes, and student housing communities.

Why Does SMRT Catch Our Eye?

1. Offerings are pivotal for their customers' operations as its ARR has averaged 22.9% growth over the past two years
2. Earnings growth has trumped its peers over the last three years as its EPS has compounded at 24.1% annually
3. Rising returns on capital show the company is starting to reap the benefits of its past investments

SmartRent is trading at $1.75 per share, or 109.7x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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