Optimum Communications, Inc. Class A common stock (OPTU)

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.

Optimum Communications’s stock price has taken a beating over the past six months, shedding 34% of its value and falling to $1.60 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.

Stocks trading in the $1-10 range are generally smaller players with less risk than their penny stock counterparts. But that doesn’t mean the underlying businesses are cheap, and we advise caution as many have questionable fundamentals.

Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.