3 Cash-Burning Stocks with Questionable Fundamentals

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

Not all companies are worth the risk, and that’s why we built StockStory - to help you spot the red flags. That said, here are three cash-burning companies to avoid and some better opportunities instead.

SoundHound AI (SOUN)

Trailing 12-Month Free Cash Flow Margin: -57.9%

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 Are We Cautious About SOUN?

1. Bad unit economics and steep infrastructure costs are reflected in its gross margin of 40.6%, one of the worst among software companies
2. Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
3. Negative free cash flow raises questions about the return timeline for its investments

SoundHound AI is trading at $6.29 per share, or 10.9x forward price-to-sales. Read our free research report to see why you should think twice about including SOUN in your portfolio.

Cogent (CCOI)

Trailing 12-Month Free Cash Flow Margin: -21.5%

Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ:CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.

Why Do We Think CCOI Will Underperform?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 4.1% annually over the last two years
2. Waning returns on capital imply its previous profit engines are losing steam
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Cogent’s stock price of $11.11 implies a valuation ratio of 8.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CCOI.

Rumble (RUM)

Trailing 12-Month Free Cash Flow Margin: -75.8%

Founded in 2013 as a champion for content creator rights and free expression, Rumble (NASDAQ:RUM) is a video sharing platform that positions itself as a free speech alternative to mainstream platforms, offering creators more favorable revenue-sharing opportunities.

Why Are We Wary of RUM?

1. Modest revenue base of $102.4 million means it has less operating leverage but can also grow faster if it executes the right sales strategy
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly

At $5.77 per share, Rumble trades at 14.6x trailing 12-month price-to-sales. If you’re considering RUM for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

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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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.