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.
Not all companies are worth the risk, and that’s why we built StockStory - to help you spot the red flags. Keeping that in mind, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
Chegg (CHGG)
Trailing 12-Month Free Cash Flow Margin: -3.4%
Started as a physical textbook rental service, Chegg (NYSE: CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.
Why Do We Think CHGG Will Underperform?
- Intense competition is diverting traffic from its platform as its services subscribers fell by 20.7% annually
- EBITDA margin declined by 15 percentage points over the last few years as its sales cratered
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
Chegg is trading at $0.58 per share, or 1.4x forward EV/EBITDA. If you’re considering CHGG for your portfolio, see our FREE research report to learn more.
Perma-Fix (PESI)
Trailing 12-Month Free Cash Flow Margin: -25.9%
Tackling hazardous waste challenges since 1990, Perma-Fix (NASDAQ: PESI) provides environmental waste treatment services.
Why Should You Dump PESI?
- Annual sales declines of 9.4% for the past five years show its products and services struggled to connect with the market during this cycle
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $12.09 per share, Perma-Fix trades at 393.2x forward P/E. Read our free research report to see why you should think twice about including PESI in your portfolio.
LGI Homes (LGIH)
Trailing 12-Month Free Cash Flow Margin: -8.3%
Based in Texas, LGI Homes (NASDAQ: LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.
Why Do We Avoid LGIH?
- Sales tumbled by 6.4% annually over the last five years, showing market trends are working against its favor during this cycle
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
LGI Homes’s stock price of $36.40 implies a valuation ratio of 14.3x forward P/E. Dive into our free research report to see why there are better opportunities than LGIH.
Stocks We Like More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
