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1 Cash-Burning Stock for Long-Term Investors and 2 Facing Headwinds
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. Keeping that in mind, here is one high-risk, high-reward company that could turn today’s losses into tomorrow’s gains and two to leave off your radar.
Two Stocks to Sell:
SoundHound AI (SOUN)
Trailing 12-Month Free Cash Flow Margin: -57%
Born from the idea that machines should understand human speech as naturally as people do, SoundHound AI (NASDAQ:SOUN) develops voice recognition and conversational intelligence technology that enables businesses to integrate voice assistants into their products and services.
Why Does SOUN Worry Us?
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
SoundHound AI’s stock price of $5.54 implies a valuation ratio of 8.1x forward price-to-sales. To fully understand why you should be careful with SOUN, check out our full research report (it’s free).
Ocular Therapeutix (OCUL)
Trailing 12-Month Free Cash Flow Margin: -490%
Pioneering a drug delivery platform that can eliminate the need for monthly eye injections, Ocular Therapeutix (NASDAQ:OCUL) develops sustained-release treatments for eye diseases using its proprietary ELUTYX bioresorbable hydrogel technology that gradually releases medication.
Why Is OCUL Risky?
- Annual sales declines of 7.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 7.5% annually while its revenue grew
- Free cash flow margin dropped by 371.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $7.48 per share, Ocular Therapeutix trades at 28.3x forward price-to-sales. Read our free research report to see why you should think twice about including OCUL in your portfolio.
One Stock to Buy:
Graham Corporation (GHM)
Trailing 12-Month Free Cash Flow Margin: -2.3%
Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE:GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.
Why Will GHM Outperform?
- Annual revenue growth of 17.9% over the past two years was outstanding, reflecting market share gains this cycle
- Operating margin expanded by 8.8 percentage points over the last five years as it scaled and became more efficient
- Earnings per share grew by 27.1% annually over the last two years, massively outpacing its peers
Graham Corporation is trading at $81.54 per share, or 44.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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.