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.

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 are three cash-burning companies that don’t make the cut and some better opportunities instead.

Icahn Enterprises (IEP)

Trailing 12-Month Free Cash Flow Margin: -7%

Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.

Why Does IEP Give Us Pause?

1. Annual sales declines of 7.1% for the past two years show its products and services struggled to connect with the market during this cycle
2. Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 10.5%
3. Free cash flow margin dropped by 7.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Icahn Enterprises is trading at $7.73 per share, or 0.5x forward price-to-sales. Read our free research report to see why you should think twice about including IEP in your portfolio.

NeoGenomics (NEO)

Trailing 12-Month Free Cash Flow Margin: -3%

Operating a network of CAP-accredited and CLIA-certified laboratories across the United States and United Kingdom, NeoGenomics (NASDAQ: NEO) provides specialized cancer diagnostic testing services, including genetic analysis, molecular testing, and pathology consultation for oncologists and healthcare providers.

Why Should You Dump NEO?

1. Earnings per share fell by 3% annually over the last five years while its revenue grew, partly because it diluted shareholders
2. Negative returns on capital show management lost money while trying to expand the business
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

At $8.26 per share, NeoGenomics trades at 47.4x forward P/E. Check out our free in-depth research report to learn more about why NEO doesn’t pass our bar.

Select Water Solutions (WTTR)

Trailing 12-Month Free Cash Flow Margin: -5.1%

Managing over 24 billion barrels of produced water annually across major U.S. shale plays, Select Water Solutions (NYSE: WTTR) provides water sourcing, recycling, disposal, and treatment services for oil and gas producers.

Why Does WTTR Worry Us?

1. Modest revenue base of $1.41 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
2. Gross margin of 22.8% is below its competitors, leaving less money to invest in exploration and production
3. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.2% for the last five years

Select Water Solutions’s stock price of $15.20 implies a valuation ratio of 44.2x forward P/E. Dive into our free research report to see why there are better opportunities than WTTR.

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