Companies that burn cash at a rapid pace can run into serious trouble if they fail to secure funding. Without a clear path to profitability, these businesses risk dilution, mounting debt, or even bankruptcy.
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. Keeping that in mind, here are three cash-burning companies to steer clear of and a few better alternatives.
Strategy (MSTR)
Trailing 12-Month Free Cash Flow Margin: -8.3%
Once a traditional business intelligence software provider, Strategy (NASDAQ: MSTR) develops AI-powered enterprise analytics software while also functioning as a major corporate holder of Bitcoin cryptocurrency.
Why Are We Bearish on MSTR?
- MicroStrategy’s core analytics software has been eclipsed by its all-in Bitcoin strategy, leaving product innovation and enterprise deals starved for attention
- The company’s debt-financed Bitcoin buying ties shareholder fortunes to crypto swings and interest rates, amplifying downside risk and uncertainty
- On the bright side, its vast Bitcoin treasury gives Executive Chairman Michael Saylor a unique springboard to capture crypto upside and court investors seeking leveraged exposure to digital assets
Strategy’s stock price of $144.66 implies a valuation ratio of 106.3x forward price-to-sales. If you’re considering MSTR for your portfolio, see our FREE research report to learn more.
RadNet (RDNT)
Trailing 12-Month Free Cash Flow Margin: -2.7%
With over 350 imaging facilities across seven states and a growing artificial intelligence division, RadNet (NASDAQ: RDNT) operates a network of outpatient diagnostic imaging centers across the United States, offering services like MRI, CT scans, PET scans, mammography, and X-rays.
Why Are We Wary of RDNT?
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 7.8% annually
- Low free cash flow margin of 1.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
At $68.90 per share, RadNet trades at 118x forward P/E. Check out our free in-depth research report to learn more about why RDNT doesn’t pass our bar.
HighPeak Energy (HPK)
Trailing 12-Month Free Cash Flow Margin: -4.2%
Operating in the oil-rich northeastern corner of the Midland Basin where Howard and Borden counties meet, HighPeak Energy (NASDAQ: HPK) explores for, develops, and produces crude oil, natural gas liquids, and natural gas.
Why Are We Cautious About HPK?
- Smaller revenue base of $893.8 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Efficiency has decreased over the last five years as its EBITDA margin fell by 18.5 percentage points
- Cash burn makes us question whether it can achieve sustainable long-term growth
HighPeak Energy is trading at $11.21 per share, or 44.2x forward P/E. Read our free research report to see why you should think twice about including HPK in your portfolio.
Stocks we like more
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
