3 Cash-Burning Stocks with Open Questions

Barchart·05/22/2026 04:38:21

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.

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. That said, here are three cash-burning companies to avoid and some better opportunities instead.

Clarus (CLAR)

Trailing 12-Month Free Cash Flow Margin: -4.9%

Initially a financial services business, Clarus (NASDAQ:CLAR) designs, manufactures, and distributes outdoor equipment and lifestyle products.

Why Are We Out on CLAR?

1. Flat sales over the last five years suggest it must innovate and find new ways to grow
2. Negative free cash flow raises questions about the return timeline for its investments
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Clarus’s stock price of $3.06 implies a valuation ratio of 0.4x forward price-to-sales. If you’re considering CLAR for your portfolio, see our FREE research report to learn more.

Purple (PRPL)

Trailing 12-Month Free Cash Flow Margin: -3.3%

Founded by two brothers, Purple (NASDAQ:PRPL) creates sleep and home comfort products such as mattresses, pillows, and bedding accessories.

Why Should You Dump PRPL?

1. Sales tumbled by 8.4% annually over the last five years, showing consumer trends are working against its favor
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Purple is trading at $0.42 per share, or 0.1x forward price-to-sales. Check out our free in-depth research report to learn more about why PRPL doesn’t pass our bar.

Moderna (MRNA)

Trailing 12-Month Free Cash Flow Margin: -72%

Rising to global prominence during the COVID-19 pandemic with one of the first effective vaccines, Moderna (NASDAQ:MRNA) develops messenger RNA (mRNA) medicines that direct the body's cells to produce proteins with therapeutic or preventive benefits for various diseases.

Why Do We Think MRNA Will Underperform?

1. Annual sales declines of 34.3% for the past two years show its products and services struggled to connect with the market during this cycle
2. Sales were less profitable over the last five years as its earnings per share fell by 46.5% annually, worse than its revenue declines
3. Free cash flow margin dropped by 129.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $47.25 per share, Moderna trades at 9.9x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MRNA.

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