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.
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 is one high-risk, high-reward company that could turn today’s losses into tomorrow’s gains and two that may struggle to stay afloat.
Two Stocks to Sell:
Beyond Meat (BYND)
Trailing 12-Month Free Cash Flow Margin: -49.2%
A pioneer at the forefront of the plant-based protein revolution, Beyond Meat (NASDAQ: BYND) is a food company specializing in alternatives to traditional meat products.
Why Should You Sell BYND?
- Shrinking unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Free cash flow margin shrank by 16.7 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $0.74 per share, Beyond Meat trades at 0.2x forward price-to-sales. Read our free research report to see why you should think twice about including BYND in your portfolio.
Rumble (RUM)
Trailing 12-Month Free Cash Flow Margin: -74%
Founded in 2013 as a champion for content creator rights and free expression, Rumble (NASDAQ: RUM) is a video sharing platform that positions itself as a free speech alternative to mainstream platforms, offering creators more favorable revenue-sharing opportunities.
Why Does RUM Fall Short?
- Efficiency has decreased over the last five years as its operating margin fell by 31.9 percentage points
- Long-term business health is up for debate as its cash burn has increased over the last five years
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
Rumble is trading at $5.45 per share, or 21.4x forward EV-to-EBITDA. If you’re considering RUM for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Fluence Energy (FLNC)
Trailing 12-Month Free Cash Flow Margin: -7.6%
Pioneering the use of lithium-ion batteries for grid storage, Fluence (NASDAQ: FLNC) helps store renewable energy sources with battery systems.
Why Will FLNC Outperform?
- Average backlog growth of 18.1% over the past two years shows it has a steady sales pipeline that will drive future orders
- Earnings per share grew by 36.4% annually over the last four years, massively outpacing its peers
- Negative free cash flow margin has improved over the last five years, showing the company is one step closer to financial self-sufficiency
Fluence Energy’s stock price of $16.65 implies a valuation ratio of 231x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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