While some companies burn cash to fuel expansion, others struggle to turn spending into sustainable growth. A high cash burn rate without a strong balance sheet can leave investors exposed to significant downside.
Not all companies are worth the risk, and that’s why we built StockStory - to help you spot the red flags. That said, here is one high-risk, high-reward company with the potential to scale into a market leader and two that could run into serious trouble.
Two Stocks to Sell:
Bally's (BALY)
Trailing 12-Month Free Cash Flow Margin: -14%
Headquartered in Providence, Rhode Island, Bally's Corporation (NYSE: BALY) is a diversified global casino-entertainment company that owns and manages casinos, resorts, and online gaming platforms.
Why Do We Think BALY Will Underperform?
- Sales trends were unexciting over the last two years as its 6.9% annual growth was below the typical consumer discretionary company
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Bally's is trading at $13.95 per share, or 13.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than BALY.
PAR Technology (PAR)
Trailing 12-Month Free Cash Flow Margin: -4.9%
Originally founded in 1968 as a defense contractor for the U.S. government, PAR Technology (NYSE: PAR) provides cloud-based software, payment processing, and hardware solutions that help restaurants manage everything from point-of-sale to customer loyalty programs.
Why Are We Hesitant About PAR?
- Cash-burning history makes us doubt the long-term viability of its business model
- Push for growth has led to negative returns on capital, signaling value destruction
At $14.07 per share, PAR Technology trades at 12.6x forward P/E. Check out our free in-depth research report to learn more about why PAR doesn’t pass our bar.
One Stock to Buy:
Super Micro (SMCI)
Trailing 12-Month Free Cash Flow Margin: -17.8%
Founded in Silicon Valley in 1993 and known for its modular "building block" approach to server design, Super Micro Computer (NASDAQ: SMCI) designs and manufactures high-performance, energy-efficient server and storage systems for data centers, cloud computing, AI, and edge computing applications.
Why Are We Bullish on SMCI?
- Annual revenue growth of 61.4% over the past two years was outstanding, reflecting market share gains this cycle
- Dominant market position is represented by its $39.06 billion in revenue and gives it fixed cost leverage when sales grow
- Earnings per share have massively outperformed its peers over the last two years, increasing by 27.8% annually
Super Micro’s stock price of $41.95 implies a valuation ratio of 9.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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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.
