Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.
Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. Keeping that in mind, here is one high-risk, high-reward company with the potential to scale into a market leader and two that could run into serious trouble.
Two Stocks to Sell:
Sleep Number (SNBR)
Trailing 12-Month Free Cash Flow Margin: -1.7%
Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ: SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.
Why Do We Steer Clear of SNBR?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Estimated sales decline of 4.6% for the next 12 months implies an even more challenging demand environment
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Sleep Number is trading at $10.13 per share, or 2.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SNBR in your portfolio.
QuidelOrtho (QDEL)
Trailing 12-Month Free Cash Flow Margin: -1.3%
Born from the 2022 merger of Quidel and Ortho Clinical Diagnostics, QuidelOrtho (NASDAQ: QDEL) develops and manufactures diagnostic testing solutions for healthcare providers, from rapid point-of-care tests to complex laboratory instruments and systems.
Why Are We Out on QDEL?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Free cash flow margin dropped by 28.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Diminishing returns on capital suggest its earlier profit pools are drying up
QuidelOrtho’s stock price of $33.67 implies a valuation ratio of 12.9x forward P/E. To fully understand why you should be careful with QDEL, check out our full research report (it’s free).
One Stock to Buy:
Planet Labs (PL)
Trailing 12-Month Free Cash Flow Margin: -24%
Pioneering the concept of "agile aerospace" with hundreds of small but powerful satellites, Planet Labs (NYSE: PL) operates the world's largest fleet of Earth observation satellites, capturing daily images of our planet to provide insights on deforestation, agriculture, and climate change.
Why Will PL Outperform?
- Impressive 20.6% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Earnings per share have massively outperformed its peers over the last four years, increasing by 49% annually
- Cash burn has become less severe over the last five years, showing the company is making some progress toward financial sustainability
At $3.91 per share, Planet Labs trades at 82.5x forward EV-to-EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
