Companies that burn cash at a rapid pace can run into serious trouble if they fail to secure funding. Without a clear path to profitability, these businesses risk dilution, mounting debt, or even bankruptcy.
Not all companies are worth the risk, and that’s why we built StockStory - to help you spot the red flags. That said, here are three cash-burning companies to steer clear of and a few better alternatives.
Krispy Kreme (DNUT)
Trailing 12-Month Free Cash Flow Margin: -6.4%
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ: DNUT) is one of the most beloved and well-known fast-food chains in the world.
Why Is DNUT Risky?
- Earnings per share have dipped by 28.6% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Cash-burning history makes us doubt the long-term viability of its business model
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Krispy Kreme’s stock price of $3.15 implies a valuation ratio of 14.5x forward EV-to-EBITDA. If you’re considering DNUT for your portfolio, see our FREE research report to learn more.
American Airlines (AAL)
Trailing 12-Month Free Cash Flow Margin: -1.2%
One of the ‘Big Four’ airlines in the US, American Airlines (NASDAQ: AAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Why Do We Pass on AAL?
- Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
- Returns on capital are growing as management invests in more worthwhile ventures
- 9× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $13.28 per share, American Airlines trades at 6.3x forward P/E. Read our free research report to see why you should think twice about including AAL in your portfolio.
Acadia Healthcare (ACHC)
Trailing 12-Month Free Cash Flow Margin: -10.6%
With a network of over 250 facilities serving patients in 38 states and Puerto Rico, Acadia Healthcare (NASDAQ: ACHC) operates facilities providing mental health and substance use disorder treatment services across the United States.
Why Does ACHC Fall Short?
- Underwhelming admissions over the past two years indicate demand is soft and that the company may need to revise its strategy
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 5.2 percentage points
- 21.7 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Acadia Healthcare is trading at $13.45 per share, or 8.5x forward P/E. To fully understand why you should be careful with ACHC, check out our full research report (it’s free).
Stocks We Like More
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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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
