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.
AAON (AAON)
Trailing 12-Month Free Cash Flow Margin: -9%
Backed by two million square feet of lab testing space, AAON (NASDAQ: AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.
Why Do We Think Twice About AAON?
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 18.7% annually
- Long-term business health is up for debate as its cash burn has increased over the last five years
- Diminishing returns on capital suggest its earlier profit pools are drying up
AAON’s stock price of $107.65 implies a valuation ratio of 48.2x forward P/E. Check out our free in-depth research report to learn more about why AAON doesn’t pass our bar.
Liberty Energy (LBRT)
Trailing 12-Month Free Cash Flow Margin: -4.8%
Operating approximately 40 active fleets across North America's most productive shale basins, Liberty Energy (NYSE: LBRT) provides hydraulic fracturing services that help oil and gas companies extract resources from shale formations.
Why Does LBRT Worry Us?
- Gross margin of 23.3% is below its competitors, leaving less money to invest in exploration and production
- Low free cash flow margin of 2.3% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Liberty Energy is trading at $24.01 per share, or 91.2x forward P/E. If you’re considering LBRT for your portfolio, see our FREE research report to learn more.
Borr Drilling (BORR)
Trailing 12-Month Free Cash Flow Margin: -11.5%
Operating one of the world's youngest jack-up fleets with an average age under eight years, Borr Drilling (NYSE: BORR) operates jack-up rigs that drill oil and gas wells in shallow waters up to 400 feet deep for exploration and production companies.
Why Does BORR Give Us Pause?
- Modest revenue base of $1.05 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Cash-burning history makes us doubt the long-term viability of its business model
At $4.51 per share, Borr Drilling trades at 176.1x forward P/E. Read our free research report to see why you should think twice about including BORR in your portfolio.
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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.
