1 High-Spending Company with Strong Potential and 2 We Steer Clear Of

Understanding the Risks of Cash-Burning Companies

Businesses that rapidly deplete their cash reserves without a clear route to profitability can face significant challenges. If they are unable to secure additional capital, they may encounter shareholder dilution, rising debt burdens, or even insolvency.

Not every company is a wise investment, which is why StockStory was created—to help you identify warning signs before they become major issues. Below, we highlight one company with high risk but also high potential, as well as two others that may face ongoing difficulties.

Stocks to Consider Selling

Lucid (LCID)

Trailing 12-Month Free Cash Flow Margin: -281%

Lucid Group (NASDAQ:LCID), established by a former Tesla executive, specializes in the design, production, and sale of premium electric vehicles known for their extended range.

Key Concerns About LCID

• With a gross margin of negative 138%, the company loses money on every vehicle sold, making a strategic shift or rapid scaling essential for survival.
• Ongoing negative free cash flow casts doubt on when its investments will yield returns.
• Dwindling cash balances could force the company to raise new funds, potentially diluting existing shareholders.

Currently, Lucid trades at $10.51 per share, equating to 1.4 times its projected price-to-sales ratio.

Tandem Diabetes (TNDM)

Trailing 12-Month Free Cash Flow Margin: -2.9%

Tandem Diabetes Care (NASDAQ:TNDM) develops automated insulin delivery systems that use continuous glucose monitoring data to help individuals with diabetes manage their blood sugar levels.

Risks Associated with TNDM

• Despite revenue growth, earnings per share have declined by 18.5% annually over the past five years, indicating that new sales are not translating into higher profits.
• Returns on capital have decreased from an already low base, suggesting that both past and current investments are not delivering expected benefits.
• Ongoing losses could necessitate further equity offerings, which may dilute shareholders if borrowing becomes difficult.

At $26.23 per share, Tandem Diabetes is valued at 32.6 times its forward EV-to-EBITDA.

Stock to Keep an Eye On

Molina Healthcare (MOH)

Trailing 12-Month Free Cash Flow Margin: -1.4%

Founded in 1980 to serve underserved populations in Southern California, Molina Healthcare (NYSE:MOH) delivers managed healthcare services mainly to low-income individuals through Medicaid, Medicare, and Marketplace plans in 21 states.

Why We’re Optimistic About MOH

• Annual revenue has grown by an impressive 18.7% over the last five years, indicating strong market share gains.
• With $45.43 billion in revenue, Molina wields significant influence with healthcare providers and plan members.

Molina Healthcare is currently priced at $146.26 per share, reflecting a forward P/E ratio of 21.4. Is this a good entry point?

Top-Quality Stocks for Any Market

This year, the market has surged, but it’s important to note that just four companies are responsible for half of the S&P 500’s total gains. Such concentration can make investors uneasy. While many chase the same popular stocks, savvy investors are seeking out high-quality opportunities that are overlooked and undervalued. Take a look at our Top 5 Growth Stocks for this month—a handpicked selection of high-quality companies that have delivered a remarkable 244% return over the past five years (as of June 30, 2025).

Our 2020 picks included now well-known names like Nvidia, which soared 1,326% from June 2020 to June 2025, as well as lesser-known firms such as Comfort Systems, which achieved a 782% five-year return. Start your search for the next standout performer with StockStory today.