Rapid spending isn't always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.
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 are three cash-burning companies to steer clear of and a few better alternatives.
Trailing 12-Month Free Cash Flow Margin: -55.8%
Rising to global prominence during the COVID-19 pandemic with one of the first effective vaccines, Moderna (NASDAQ:MRNA) develops messenger RNA (mRNA) medicines that direct the body's cells to produce proteins with therapeutic or preventive benefits for various diseases.
Why Do We Think MRNA Will Underperform?
Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
Free cash flow margin dropped by 95.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Moderna is trading at $144.62 per share, or 26.6x forward price-to-sales. Check out our free in-depth research report to learn more about why MRNA doesn't pass our bar.
Trailing 12-Month Free Cash Flow Margin: -77.5%
Pioneering what scientists call "HiFi long-read sequencing," recognized as Nature Methods' method of the year for 2022, Pacific Biosciences (NASDAQ:PACB) develops advanced DNA sequencing systems that enable scientists and researchers to analyze genomes with unprecedented accuracy and completeness.
Why Are We Hesitant About PACB?
Annual sales declines of 8.2% for the past two years show its products and services struggled to connect with the market during this cycle
Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $1.31 per share, PacBio trades at 2.3x forward price-to-sales. To fully understand why you should be careful with PACB, check out our full research report (it's free).
Trailing 12-Month Free Cash Flow Margin: -14.2%
Operating one of the world's youngest jack-up fleets with an average age under eight years, Borr Drilling (NYSE:BORR) operates jack-up rigs that drill oil and gas wells in shallow waters up to 400 feet deep for exploration and production companies.
Why Do We Think Twice About BORR?
Revenue base of $1.02 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
Negative free cash flow raises questions about the return timeline for its investments
Borr Drilling's stock price of $4.28 implies a valuation ratio of 8.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including BORR in your portfolio, it's free.
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.