While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Chewy (CHWY)
Trailing 12-Month Free Cash Flow Margin: 4.3%
Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE: CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.
Why Is CHWY Not Exciting?
- The company has faced growth challenges as its 6.5% annual revenue increases over the last three years fell short of other consumer internet companies
- Projected sales growth of 7% for the next 12 months suggests sluggish demand
- Gross margin of 29.7% is below its competitors, leaving less money to invest in areas like marketing and R&D
Chewy’s stock price of $18.23 implies a valuation ratio of 8.2x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than CHWY.
Align Technology (ALGN)
Trailing 12-Month Free Cash Flow Margin: 15.8%
Pioneering an alternative to traditional metal braces with nearly invisible plastic aligners, Align Technology (NASDAQ: ALGN) designs and manufactures Invisalign clear aligners, iTero intraoral scanners, and dental CAD/CAM software for orthodontic and restorative treatments.
Why Are We Cautious About ALGN?
- Annual revenue growth of 2.5% over the last two years was below our standards for the healthcare sector
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 1.4% annually
- Eroding returns on capital suggest its historical profit centers are aging
At $145.39 per share, Align Technology trades at 12.2x forward P/E. If you’re considering ALGN for your portfolio, see our FREE research report to learn more.
Enova (ENVA)
Trailing 12-Month Free Cash Flow Margin: 58%
Pioneering online lending since 2004 with a massive database of over 65 terabytes of customer behavior data, Enova International (NYSE: ENVA) provides online financial services including installment loans and lines of credit to non-prime consumers and small businesses in the United States and Brazil.
Why Are We Wary of ENVA?
- Performance over the past five years shows its incremental sales were less profitable, as its 8.8% annual earnings per share growth trailed its revenue gains
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Enova is trading at $167.20 per share, or 8.7x forward P/E. Read our free research report to see why you should think twice about including ENVA in your portfolio.
Stocks We Like More
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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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
