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.

Negative cash flow can lead to trouble, but StockStory helps you identify the businesses that stand a chance of making it through. That said, here are three cash-burning companies to avoid and some better opportunities instead.

Lincoln Educational (LINC)

Trailing 12-Month Free Cash Flow Margin: -9.5%

Established in 1946, Lincoln Educational (NASDAQ: LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.

Why Do We Pass on LINC?

1. Performance surrounding its enrolled students has lagged its peers
2. Negative free cash flow raises questions about the return timeline for its investments
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Lincoln Educational’s stock price of $26.94 implies a valuation ratio of 34.7x forward P/E. If you’re considering LINC for your portfolio, see our FREE research report to learn more.

Strategy (MSTR)

Trailing 12-Month Free Cash Flow Margin: -71%

Once a traditional business intelligence software provider, Strategy (NASDAQ: MSTR) develops AI-powered enterprise analytics software while also functioning as a major corporate holder of Bitcoin cryptocurrency.

Why Do We Avoid MSTR?

1. MicroStrategy’s core analytics software has been eclipsed by its all-in Bitcoin strategy, leaving product innovation and enterprise deals starved for attention
2. The company’s debt-financed Bitcoin buying ties shareholder fortunes to crypto swings and interest rates, amplifying downside risk and uncertainty
3. On the bright side, its vast Bitcoin treasury gives Executive Chairman Michael Saylor a unique springboard to capture crypto upside and court investors seeking leveraged exposure to digital assets

At $126.03 per share, Strategy trades at 79.1x forward price-to-sales. Read our free research report to see why you should think twice about including MSTR in your portfolio.

Neogen (NEOG)

Trailing 12-Month Free Cash Flow Margin: -2.1%

Founded in 1981 and operating at the intersection of food safety and animal health, Neogen (NASDAQ: NEOG) develops and manufactures diagnostic tests and related products to detect dangerous substances in food and pharmaceuticals for animal health.

Why Are We Out on NEOG?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.1% annually over the last two years
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. EBITDA losses may force it to accept punitive lending terms or high-cost debt

Neogen is trading at $10.75 per share, or 38.6x forward P/E. To fully understand why you should be careful with NEOG, check out our full research report (it’s free).

Stocks We Like More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.