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.
Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here are three cash-burning companies to avoid and some better opportunities instead.
Lincoln Educational (LINC)
Trailing 12-Month Free Cash Flow Margin: -9.5%
Established in 1946, Lincoln Educational (NASDAQ:LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.
Why Do We Pass on LINC?
- Performance surrounding its enrolled students has lagged its peers
- Negative free cash flow raises questions about the return timeline for its investments
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Lincoln Educational’s stock price of $26.94 implies a valuation ratio of 34.7x forward P/E. If you’re considering LINC for your portfolio, see our FREE research report to learn more.
Strategy (MSTR)
Trailing 12-Month Free Cash Flow Margin: -71%
Once a traditional business intelligence software provider, Strategy (NASDAQ:MSTR) develops AI-powered enterprise analytics software while also functioning as a major corporate holder of Bitcoin cryptocurrency.
Why Do We Avoid MSTR?
- MicroStrategy’s core analytics software has been eclipsed by its all-in Bitcoin strategy, leaving product innovation and enterprise deals starved for attention
- The company’s debt-financed Bitcoin buying ties shareholder fortunes to crypto swings and interest rates, amplifying downside risk and uncertainty
- On the bright side, its vast Bitcoin treasury gives Executive Chairman Michael Saylor a unique springboard to capture crypto upside and court investors seeking leveraged exposure to digital assets
At $126.03 per share, Strategy trades at 79.1x forward price-to-sales. Read our free research report to see why you should think twice about including MSTR in your portfolio.
Neogen (NEOG)
Trailing 12-Month Free Cash Flow Margin: -2.1%
Founded in 1981 and operating at the intersection of food safety and animal health, Neogen (NASDAQ:NEOG) develops and manufactures diagnostic tests and related products to detect dangerous substances in food and pharmaceuticals for animal health.
Why Are We Out on NEOG?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.1% annually over the last two years
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- EBITDA losses may force it to accept punitive lending terms or high-cost debt
Neogen is trading at $10.75 per share, or 38.6x forward P/E. To fully understand why you should be careful with NEOG, check out our full research report (it’s free).
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.