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 that don’t make the cut and some better opportunities instead.

Advance Auto Parts (AAP)

Trailing 12-Month Free Cash Flow Margin: -2.8%

Founded in Virginia in 1932, Advance Auto Parts (NYSE: AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.

Why Should You Dump AAP?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Advance Auto Parts’s stock price of $65.52 implies a valuation ratio of 31.1x forward P/E. Dive into our free research report to see why there are better opportunities than AAP.

Norwegian Cruise Line (NCLH)

Trailing 12-Month Free Cash Flow Margin: -5.9%

With amenities like a full go-kart race track built into its ships, Norwegian Cruise Line (NYSE: NCLH) is a premier global cruise company.

Why Do We Think Twice About NCLH?

1. Demand for its offerings was relatively low as its number of passenger cruise days has underwhelmed
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

At $24.27 per share, Norwegian Cruise Line trades at 11.4x forward P/E. To fully understand why you should be careful with NCLH, check out our full research report (it’s free).

NN (NNBR)

Trailing 12-Month Free Cash Flow Margin: -2.2%

Formerly known as Nuturn, NN (NASDAQ: NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.

Why Do We Avoid NNBR?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.3% annually over the last five years
2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
3. Long-term business health is up for debate as its cash burn has increased over the last five years

NN is trading at $2.03 per share, or 334.8x forward P/E. If you’re considering NNBR for your portfolio, see our FREE research report to learn more.

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