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.
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 is one high-risk, high-reward company investing aggressively to carve out a leadership position and two to leave off your radar.
Two Stocks to Sell:
AMC Entertainment (AMC)
Trailing 12-Month Free Cash Flow Margin: -2.5%
With a profile that was raised due to meme stock mania beginning in 2021, AMC Entertainment (NYSE: AMC) operates movie theaters primarily in the US and Europe.
Why Do We Think AMC Will Underperform?
- Sales trends were unexciting over the last two years as its 2.3% annual growth was below the typical consumer discretionary company
- Free cash flow margin is projected to show no improvement next year
AMC Entertainment’s stock price of $1.96 implies a valuation ratio of 14.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including AMC in your portfolio.
Frontier (ULCC)
Trailing 12-Month Free Cash Flow Margin: -12.1%
Recognizable for the colorful animals adorning each aircraft tail, Frontier Group Holdings (NASDAQ: ULCC) is an ultra low-cost airline that provides budget-friendly flights throughout the United States and select international destinations in the Americas.
Why Do We Avoid ULCC?
- Annual revenue growth of 3.7% over the last two years was below our standards for the consumer discretionary sector
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $6.23 per share, Frontier trades at 0.3x forward price-to-sales. If you’re considering ULCC for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
SoFi (SOFI)
Trailing 12-Month Free Cash Flow Margin: -162%
Starting as a student loan refinancing company founded by Stanford business school students in 2011, SoFi Technologies (NASDAQ: SOFI) operates a digital financial platform offering lending, banking, investing, and other financial services to help members borrow, save, spend, invest, and protect their money.
Why Is SOFI a Top Pick?
- Market share has increased this cycle as its 33.4% annual revenue growth over the last two years was exceptional
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 396% annually, topping its revenue gains
SoFi is trading at $16.32 per share, or 25.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
