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 avoid and some better opportunities instead.
iHeartMedia (IHRT)
Trailing 12-Month Free Cash Flow Margin: -345%
Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ:IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.
Why Is IHRT Risky?
- Annual revenue growth of 4.9% over the last five years was below our standards for the consumer discretionary sector
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $3.82 per share, iHeartMedia trades at 0.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why IHRT doesn’t pass our bar.
3D Systems (DDD)
Trailing 12-Month Free Cash Flow Margin: -24.1%
Founded by the inventor of stereolithography, 3D Systems (NYSE:DDD) engineers, manufactures, and sells 3D printers and other related products to the aerospace, automotive, healthcare, and consumer goods industries.
Why Do We Think DDD Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 6.7% annually over the last five years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
3D Systems’s stock price of $2.04 implies a valuation ratio of 0.7x forward price-to-sales. Read our free research report to see why you should think twice about including DDD in your portfolio.
Cogent (CCOI)
Trailing 12-Month Free Cash Flow Margin: -18.9%
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ:CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Why Does CCOI Worry Us?
- Sluggish trends in its total connections suggest customers aren’t adopting its solutions as quickly as the company hoped
- Diminishing returns on capital suggest its earlier profit pools are drying up
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Cogent is trading at $17.74 per share, or 2.5x forward EV-to-EBITDA. To fully understand why you should be careful with CCOI, check out our full research report (it’s free for active Edge members).
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 Strong Momentum 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-micro-cap company Kadant (+351% 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
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