1 Cash-Burning Stock for Long-Term Investors and 2 We Avoid

Rapid spending isn't always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.

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 is one high-risk, high-reward company investing aggressively to carve out a leadership position and two that could run into serious trouble.

Two Stocks to Sell:

Kura Sushi (KRUS)

Trailing 12-Month Free Cash Flow Margin: -7.8%

Known for its conveyor belt that transports dishes to diners, Kura Sushi (NASDAQ:KRUS) is a chain of sushi restaurants serving traditional Japanese fare with a touch of modernity and technology.

Why Is KRUS Not Exciting?

1. Disappointing same-store sales over the past two years show customers aren't responding well to its menu offerings and dining experience

2. Cash burn makes us question whether it can achieve sustainable long-term growth

3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

At $38.25 per share, Kura Sushi trades at 335.1x forward P/E. Dive into our free research report to see why there are better opportunities than KRUS .

Plug Power (PLUG)

Trailing 12-Month Free Cash Flow Margin: -70.3%

Powering forklifts for Walmart's distribution centers, Plug Power (NASDAQ:PLUG) provides hydrogen fuel cells used to power electric motors.

Why Does PLUG Give Us Pause?

1. Sales trends were unexciting over the last two years as its 4.3% annual growth was below the typical industrials company

2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Plug Power is trading at $1.78 per share, or 2.9x forward price-to-sales. To fully understand why you should be careful with PLUG, check out our full research report (it's free) .

One Stock to Watch:

Gevo (GEVO)

Trailing 12-Month Free Cash Flow Margin: -31.9%

Operating one of the largest dairy-based renewable natural gas facilities in the United States, Gevo (NASDAQ:GEVO) produces sustainable aviation fuel and other renewable hydrocarbon fuels from plant-based feedstocks like corn.

Why Are We Fans of GEVO?

1. Annual revenue growth of 19.6% over the past ten years was outstanding, reflecting market share gains this cycle

2. EBITDA profits and efficiency rose over the last five years as it benefited from some fixed cost leverage

Gevo's stock price of $1.32 implies a valuation ratio of 6.4x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it's free .