2 Cash-Burning Stocks on Our Watchlist and 1 That Underwhelm
Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.
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 two high-risk, high-reward companies that could turn today’s losses into tomorrow’s gains and one that may struggle to stay afloat.
One Stock to Sell:
SmartRent (SMRT)
Trailing 12-Month Free Cash Flow Margin: -1.4%
Founded by an employee at a real estate rental company, SmartRent (NYSE:SMRT) provides smart home devices and software for multifamily residential properties, single-family rental homes, and student housing communities.
Why Do We Think Twice About SMRT?
- Sales tumbled by 16.6% annually over the last two years, showing market trends are working against it during this cycle
- Historically negative EPS casts doubt for cautious investors and clouds its long-term earnings prospects
- Cash-burning history makes us doubt the long-term viability of its business model
SmartRent is trading at $1.19 per share, or 30.6x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SMRT in your portfolio.
Two Stocks to Watch:
Kratos (KTOS)
Trailing 12-Month Free Cash Flow Margin: -8.5%
Established with a commitment to supporting national security, Kratos (NASDAQ:KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.
Why Is KTOS a Good Business?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 14.9% over the past two years
- Exciting sales outlook for the upcoming 12 months calls for 30.6% growth, an acceleration from its two-year trend
- Earnings per share grew by 18.7% annually over the last two years and trumped its peers
At $43.29 per share, Kratos trades at 48.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Avnet (AVT)
Trailing 12-Month Free Cash Flow Margin: -1.3%
With a century-long history of adapting to technological evolution, Avnet (NASDAQ:AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.
Why Do We Like AVT?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 7.8% annual sales growth over the last two years
- Unparalleled revenue scale of $27.63 billion gives it an edge in distribution
- Share buybacks catapulted its annual earnings per share growth to 15.9%, which outperformed its revenue gains over the last five years
Avnet’s stock price of $101.46 implies a valuation ratio of 9.6x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.