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.
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 steer clear of and a few better alternatives.
AeroVironment (AVAV)
Trailing 12-Month Free Cash Flow Margin: -17.6%
Focused on the future of autonomous military combat, AeroVironment (NASDAQ: AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.
Why Are We Hesitant About AVAV?
- Efficiency has decreased over the last five years as its operating margin fell by 8.4 percentage points
- Earnings per share fell by 9.9% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 19 percentage points
AeroVironment’s stock price of $278.45 implies a valuation ratio of 63.6x forward P/E. Dive into our free research report to see why there are better opportunities than AVAV.
Byrna (BYRN)
Trailing 12-Month Free Cash Flow Margin: -10%
Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ: BYRN) is a provider of non-lethal weapons.
Why Are We Cautious About BYRN?
- Historical operating margin losses point to an inefficient cost structure
- Negative free cash flow raises questions about the return timeline for its investments
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $13.71 per share, Byrna trades at 15.5x forward EV-to-EBITDA. If you’re considering BYRN for your portfolio, see our FREE research report to learn more.
Park-Ohio (PKOH)
Trailing 12-Month Free Cash Flow Margin: -1.1%
Based in Cleveland, Park-Ohio (NASDAQ: PKOH) provides supply chain management services, capital equipment, and manufactured components.
Why Do We Steer Clear of PKOH?
- Annual sales declines of 1.8% for the past two years show its products and services struggled to connect with the market during this cycle
- Gross margin of 15.5% 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
Park-Ohio is trading at $22.61 per share, or 7.1x forward P/E. Check out our free in-depth research report to learn more about why PKOH doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
