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. That said, here are three cash-burning companies to avoid and some better opportunities instead.
PENN Entertainment (PENN)
Trailing 12-Month Free Cash Flow Margin: -2.6%
Established in 1982, PENN Entertainment (NASDAQ: PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.
Why Do We Avoid PENN?
- Muted 11.9% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $14.20 per share, PENN Entertainment trades at 30.1x forward P/E. Read our free research report to see why you should think twice about including PENN in your portfolio.
Ameresco (AMRC)
Trailing 12-Month Free Cash Flow Margin: -20.1%
Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE: AMRC) provides energy and renewable energy solutions for various sectors.
Why Does AMRC Fall Short?
- Gross margin of 16.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Cash-burning history makes us doubt the long-term viability of its business model
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Ameresco is trading at $33.14 per share, or 34x forward P/E. If you’re considering AMRC for your portfolio, see our FREE research report to learn more.
AerSale (ASLE)
Trailing 12-Month Free Cash Flow Margin: -1.9%
Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ: ASLE) delivers full-service support to mid-life commercial aircraft.
Why Do We Think ASLE Will Underperform?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Negative free cash flow raises questions about the return timeline for its investments
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
AerSale’s stock price of $7.65 implies a valuation ratio of 12.3x forward P/E. Check out our free in-depth research report to learn more about why ASLE doesn’t pass our bar.
Stocks We Like More
Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
