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. That said, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
fuboTV (FUBO)
Trailing 12-Month Free Cash Flow Margin: -3.2%
Originally launched as a soccer streaming platform, fuboTV (NYSE: FUBO) is a video streaming service specializing in live sports, news, and entertainment content.
Why Should You Dump FUBO?
- Sluggish trends in its domestic subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Negative free cash flow raises questions about the return timeline for its investments
fuboTV’s stock price of $1.19 implies a valuation ratio of 1.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why FUBO doesn’t pass our bar.
Bally's (BALY)
Trailing 12-Month Free Cash Flow Margin: -10.7%
Headquartered in Providence, Rhode Island, Bally's Corporation (NYSE: BALY) is a diversified global casino-entertainment company that owns and manages casinos, resorts, and online gaming platforms.
Why Do We Avoid BALY?
- 2% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $13.41 per share, Bally's trades at 10.9x forward EV-to-EBITDA. To fully understand why you should be careful with BALY, check out our full research report (it’s free).
EVgo (EVGO)
Trailing 12-Month Free Cash Flow Margin: -32.4%
Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ: EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.
Why Does EVGO Fall Short?
- Historical operating margin losses point to an inefficient cost structure
- 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
EVgo is trading at $2.22 per share, or 55.1x forward EV-to-EBITDA. If you’re considering EVGO for your portfolio, see our FREE research report to learn more.
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