A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here are three cash-producing companies to steer clear of and a few better alternatives.
Box (BOX)
Trailing 12-Month Free Cash Flow Margin: 27.9%
Founded in 2005 by Aaron Levie and Dylan Smith, Box (NYSE: BOX) provides organizations with software to securely store, share and collaborate around work documents in the cloud.
Why Is BOX Not Exciting?
- Annual revenue growth of 7.6% over the last three years was well below our standards for the software sector
- Products, pricing, or go-to-market strategy may need some adjustments as its 4.7% average billings growth over the last year was weak
- Estimated sales growth of 5.4% for the next 12 months implies demand will slow from its three-year trend
Box is trading at $31.18 per share, or 4.1x forward price-to-sales. Read our free research report to see why you should think twice about including BOX in your portfolio.
General Mills (GIS)
Trailing 12-Month Free Cash Flow Margin: 12.6%
Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE: GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.
Why Does GIS Worry Us?
- Falling unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Sales are projected to tank by 4.3% over the next 12 months as demand evaporates
General Mills’s stock price of $55.64 implies a valuation ratio of 13.1x forward P/E. To fully understand why you should be careful with GIS, check out our full research report (it’s free).
ArcBest (ARCB)
Trailing 12-Month Free Cash Flow Margin: 1.8%
Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ: ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.
Why Do We Pass on ARCB?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Earnings per share have dipped by 32.9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $61.90 per share, ArcBest trades at 9.7x forward P/E. Check out our free in-depth research report to learn more about why ARCB doesn’t pass our bar.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
