Rapid spending isn’t always a sign of progress. Some cash-burning businesses fail to convert investments into meaningful competitive advantages, leaving them vulnerable.
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 is one high-risk, high-reward company investing aggressively to carve out a leadership position and two that may struggle to stay afloat.
Two Stocks to Sell:
IPG Photonics (IPGP)
Trailing 12-Month Free Cash Flow Margin: -1.3%
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ: IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Why Do We Pass on IPGP?
- Annual sales declines of 4.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Historical operating margin losses have deepened over the last five years, hinting at increased competitive pressures and an inefficient cost structure
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 19.8% annually, worse than its revenue
At $106.28 per share, IPG Photonics trades at 59.8x forward P/E. If you’re considering IPGP for your portfolio, see our FREE research report to learn more.
Under Armour (UAA)
Trailing 12-Month Free Cash Flow Margin: -3.3%
Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE: UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.
Why Are We Out on UAA?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Under Armour is trading at $6.77 per share, or 56.5x forward P/E. To fully understand why you should be careful with UAA, check out our full research report (it’s free).
One Stock to Buy:
Rocket Lab (RKLB)
Trailing 12-Month Free Cash Flow Margin: -46.5%
Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ: RKLB) offers rockets designed for launching small satellites.
Why Will RKLB Outperform?
- Annual revenue growth of 55.1% over the last two years was superb and indicates its market share increased during this cycle
- Operating margin expanded by 111.4 percentage points over the last five years as it scaled and became more efficient
- Cash burn has become less severe over the last five years, showing the company is making some progress toward financial sustainability
Rocket Lab’s stock price of $81.57 implies a valuation ratio of 50.7x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
