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?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 19.2% decline in its backlog
- 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
- 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?
- Modest revenue base of $709.2 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Negative returns on capital show that some of its growth strategies have backfired
- 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?
- Offerings are pivotal for their customers' operations as its ARR has averaged 22.9% growth over the past two years
- Earnings growth has trumped its peers over the last three years as its EPS has compounded at 24.1% annually
- 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).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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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