Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Gray Television (GTN)
Trailing 12-Month Free Cash Flow Margin: 10.5%
Specializing in local media coverage, Gray Television (NYSE: GTN) is a broadcast company supplying digital media to various markets in the United States.
Why Should You Sell GTN?
- Sales were flat over the last two years, indicating it's failed to expand its business
- Forecasted revenue decline of 11.8% for the upcoming 12 months implies demand will fall off a cliff
- Free cash flow margin is forecasted to shrink by 10 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
At $3.38 per share, Gray Television trades at 0.4x forward EV-to-EBITDA. To fully understand why you should be careful with GTN, check out our full research report (it’s free).
Accel Entertainment (ACEL)
Trailing 12-Month Free Cash Flow Margin: 4.4%
Established in Illinois, Accel Entertainment (NYSE: ACEL) is a provider of electronic gaming machines and interactive amusement terminals to bars and entertainment venues.
Why Is ACEL Not Exciting?
- 12.7% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Estimated sales growth of 6.1% for the next 12 months implies demand will slow from its two-year trend
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Accel Entertainment’s stock price of $10.71 implies a valuation ratio of 11.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than ACEL.
Mattel (MAT)
Trailing 12-Month Free Cash Flow Margin: 11.1%
Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ: MAT) is a global children's entertainment company specializing in the design and production of consumer products.
Why Do We Avoid MAT?
- Products and services fail to spark excitement with consumers, as seen in its flat sales over the last two years
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.8%
- Eroding returns on capital suggest its historical profit centers are aging
Mattel is trading at $15.58 per share, or 9.9x forward price-to-earnings. If you’re considering MAT for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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