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.
Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. Keeping that in mind, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
Bark (BARK)
Trailing 12-Month Free Cash Flow Margin: -4.1%
Making a name for itself with the BarkBox, Bark (NYSE:BARK) specializes in subscription-based, personalized pet products.
Why Do We Steer Clear of BARK?
- Products and services aren't resonating with the market as its revenue declined by 5.3% annually over the last two years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Bark is trading at $0.86 per share, or 125.3x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than BARK.
ChargePoint (CHPT)
Trailing 12-Month Free Cash Flow Margin: -20%
The most prominent EV charging company during the COVID bull market, ChargePoint (NYSE:CHPT) is a provider of electric vehicle charging technology solutions in North America and Europe.
Why Are We Wary of CHPT?
- Annual sales declines of 15.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
ChargePoint’s stock price of $10.68 implies a valuation ratio of 0.6x forward price-to-sales. If you’re considering CHPT for your portfolio, see our FREE research report to learn more.
PAR Technology (PAR)
Trailing 12-Month Free Cash Flow Margin: -4.5%
Originally founded in 1968 as a defense contractor for the U.S. government, PAR Technology (NYSE:PAR) provides cloud-based software, payment processing, and hardware solutions that help restaurants manage everything from point-of-sale to customer loyalty programs.
Why Do We Think Twice About PAR?
- Cash-burning history makes us doubt the long-term viability of its business model
- Push for growth has led to negative returns on capital, signaling value destruction
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $43.84 per share, PAR Technology trades at 114.5x forward P/E. To fully understand why you should be careful with PAR, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
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