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. Keeping that in mind, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
ChargePoint (CHPT)
Trailing 12-Month Free Cash Flow Margin: -16.3%
The most prominent EV charging company during the COVID bull market, ChargePoint (NYSE: CHPT) is a provider of electric vehicle charging technology solutions in North America and Europe.
Why Are We Hesitant About CHPT?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 9.9% annually over the last two years
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly
ChargePoint’s stock price of $5.33 implies a valuation ratio of 0.3x forward price-to-sales. Check out our free in-depth research report to learn more about why CHPT doesn’t pass our bar.
AMC Entertainment (AMC)
Trailing 12-Month Free Cash Flow Margin: -7.5%
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 Does AMC Give Us Pause?
- Sales were flat over the last two years, indicating it’s failed to expand its business
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $1 per share, AMC Entertainment trades at 14.3x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than AMC.
agilon health (AGL)
Trailing 12-Month Free Cash Flow Margin: -2%
Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE: AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.
Why Do We Think Twice About AGL?
- Sales are projected to tank by 8% over the next 12 months as demand evaporates
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 3.6 percentage points
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
agilon health is trading at $0.43 per share, or 3.3x forward EV-to-EBITDA. To fully understand why you should be careful with AGL, check out our full research report (it’s free).
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