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. Keeping that in mind, here are three cash-burning companies that don’t make the cut and some better opportunities instead.
Camping World (CWH)
Trailing 12-Month Free Cash Flow Margin: -2.7%
Founded in 1966 as a single recreational vehicle (RV) dealership, Camping World (NYSE:CWH) still sells RVs along with boats and general merchandise for outdoor activities.
Why Are We Out on CWH?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Camping World is trading at $11.17 per share, or 15.1x forward P/E. If you’re considering CWH for your portfolio, see our FREE research report to learn more.
Sleep Number (SNBR)
Trailing 12-Month Free Cash Flow Margin: -3.3%
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 Think SNBR Will Underperform?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Sales were less profitable over the last three years as its earnings per share fell by 51.4% annually, worse than its revenue declines
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $5.54 per share, Sleep Number trades at 1.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SNBR doesn’t pass our bar.
AerSale (ASLE)
Trailing 12-Month Free Cash Flow Margin: -1.9%
Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ:ASLE) delivers full-service support to mid-life commercial aircraft.
Why Should You Dump ASLE?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Cash-burning history makes us doubt the long-term viability of its business model
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
AerSale’s stock price of $6.36 implies a valuation ratio of 10.7x forward P/E. Dive into our free research report to see why there are better opportunities than ASLE.
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