Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.
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. Keeping that in mind, here are three cash-burning companies to steer clear of and a few better alternatives.
Kura Sushi (KRUS)
Trailing 12-Month Free Cash Flow Margin: -10.3%
Known for its conveyor belt that transports dishes to diners, Kura Sushi (NASDAQ: KRUS) is a chain of sushi restaurants serving traditional Japanese fare with a touch of modernity and technology.
Why Does KRUS Worry Us?
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 4.6 percentage points
- Historically negative EPS is a worrisome sign for conservative investors and obscures its long-term earnings potential
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
Kura Sushi’s stock price of $79.99 implies a valuation ratio of 1,261.2x forward P/E. Check out our free in-depth research report to learn more about why KRUS doesn’t pass our bar.
1-800-FLOWERS (FLWS)
Trailing 12-Month Free Cash Flow Margin: -2.9%
Founded in 1976, 1-800-FLOWERS (NASDAQ: FLWS) is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.
Why Is FLWS Risky?
- Sales tumbled by 9.9% annually over the last two years, showing consumer trends are working against its favor
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 24.2% annually
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
1-800-FLOWERS is trading at $5.15 per share, or 17.3x forward P/E. Dive into our free research report to see why there are better opportunities than FLWS.
AerSale (ASLE)
Trailing 12-Month Free Cash Flow Margin: -7.9%
Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ: ASLE) delivers full-service support to mid-life commercial aircraft.
Why Should You Sell ASLE?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2% annually over the last five years
- Negative free cash flow raises questions about the return timeline for its investments
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $6.08 per share, AerSale trades at 12.9x forward P/E. To fully understand why you should be careful with ASLE, check out our full research report (it’s free).
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
