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.
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. That said, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
Magnachip (MX)
Trailing 12-Month Free Cash Flow Margin: -22.3%
With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE: MX) is a provider of analog and mixed-signal semiconductors.
Why Do We Pass on MX?
- Sales tumbled by 16.2% annually over the last five years, showing market trends are working against its favor during this cycle
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Increased cash burn over the last five years raises questions about the return timeline for its investments
At $3.18 per share, Magnachip trades at 0.6x forward price-to-sales. Check out our free in-depth research report to learn more about why MX doesn’t pass our bar.
Trinity (TRN)
Trailing 12-Month Free Cash Flow Margin: -18.2%
Operating under the trade name TrinityRail, Trinity (NYSE: TRN) is a provider of railcar products and services in North America.
Why Are We Out on TRN?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.2% annually over the last five years
- Sales are projected to tank by 3.5% over the next 12 months as its demand continues evaporating
- 23.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Trinity is trading at $27.41 per share, or 10.3x forward P/E. Read our free research report to see why you should think twice about including TRN in your portfolio.
Goodyear (GT)
Trailing 12-Month Free Cash Flow Margin: -1.9%
With its iconic blimp floating above major sporting events since 1925, Goodyear (NYSE: GT) is one of the world's largest tire manufacturers, producing and selling tires for automobiles, trucks, aircraft, and other vehicles, along with related services.
Why Should You Sell GT?
- Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
- Free cash flow margin dropped by 5.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Underwhelming 4.9% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam
Goodyear’s stock price of $9.37 implies a valuation ratio of 7.8x forward P/E. If you’re considering GT for your portfolio, see our FREE research report to learn more.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
