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.

Just because a company is spending heavily doesn’t mean it’s on the right track, and StockStory is here to separate the winners from the losers. That said, here are three cash-burning companies to avoid and some better opportunities instead.

Trailing 12-Month Free Cash Flow Margin: -2.6%

Established in 1982, PENN Entertainment (NASDAQ:PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.

Why Do We Avoid PENN?

Muted 11.9% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers

Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $14.20 per share, PENN Entertainment trades at 30.1x forward P/E. Dive into our free research report to see why there are better opportunities than PENN.

Trailing 12-Month Free Cash Flow Margin: -20.1%

Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE:AMRC) provides energy and renewable energy solutions for various sectors.

Why Does AMRC Fall Short?

Gross margin of 16.5% is below its competitors, leaving less money to invest in areas like marketing and R&D

Cash-burning history makes us doubt the long-term viability of its business model

Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Ameresco is trading at $33.14 per share, or 34x forward P/E. Check out our free in-depth research report to learn more about why AMRC doesn’t pass our bar.

Trailing 12-Month Free Cash Flow Margin: -1.9%

Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ:ASLE) delivers full-service support to mid-life commercial aircraft.

Why Do We Think ASLE Will Underperform?

Sales stagnated over the last two years and signal the need for new growth strategies

Negative free cash flow raises questions about the return timeline for its investments

Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

AerSale’s stock price of $7.65 implies a valuation ratio of 12.3x forward P/E. To fully understand why you should be careful with ASLE, check out our full research report (it’s free).

Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.