Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.
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 steer clear of and a few better alternatives.
Lovesac (LOVE)
Trailing 12-Month Free Cash Flow Margin: -1.4%
Known for its oversized, premium beanbags, Lovesac (NASDAQ: LOVE) is a specialty furniture brand selling modular furniture.
Why Do We Pass on LOVE?
- Muted 1.6% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Lovesac is trading at $13.87 per share, or 54.3x forward P/E. Read our free research report to see why you should think twice about including LOVE in your portfolio.
Matthews (MATW)
Trailing 12-Month Free Cash Flow Margin: -4%
Originally a death care company, Matthews International (NASDAQ: MATW) is a diversified company offering ceremonial services, brand solutions and industrial technologies.
Why Do We Steer Clear of MATW?
- Flat sales over the last five years suggest it must innovate and find new ways to grow
- Low free cash flow margin of -0.8% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Stagnant returns on capital show management has failed to improve the company’s business quality
At $24.44 per share, Matthews trades at 21.8x forward P/E. To fully understand why you should be careful with MATW, check out our full research report (it’s free for active Edge members).
Tilray (TLRY)
Trailing 12-Month Free Cash Flow Margin: -10.7%
Founded in 2013, Tilray Brands (NASDAQ: TLRY) engages in cannabis research, cultivation, and distribution, offering a range of medical and recreational cannabis products, hemp-based foods, and alcoholic beverages.
Why Should You Sell TLRY?
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 248.3 percentage points
- Long-term business health is up for debate as its cash burn has increased over the last year
- Push for growth has led to negative returns on capital, signaling value destruction, and its decreasing returns suggest its historical profit centers are aging
Tilray’s stock price of $7.23 implies a valuation ratio of 112.3x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why TLRY doesn’t pass our bar.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 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-small-cap company Comfort Systems (+782% 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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