A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are three cash-producing companies to steer clear of and a few better alternatives.
Qualcomm (QCOM)
Trailing 12-Month Free Cash Flow Margin: 28.1%
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ: QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Why Do We Think Twice About QCOM?
- Sales are projected to tank by 8.8% over the next 12 months as demand evaporates
- Efficiency has decreased over the last five years as its operating margin fell by 7.2 percentage points
Qualcomm is trading at $206.28 per share, or 21.8x forward P/E. To fully understand why you should be careful with QCOM, check out our full research report (it’s free).
Travel + Leisure (TNL)
Trailing 12-Month Free Cash Flow Margin: 10.9%
Formerly known as Wyndham Destinations, Travel + Leisure (NYSE: TNL) is a global vacation company that provides travelers with vacation ownership, exchange, and travel services.
Why Should You Sell TNL?
- Sluggish trends in its tours conducted suggest customers aren’t adopting its solutions as quickly as the company hoped
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $63.94 per share, Travel + Leisure trades at 8.3x forward P/E. If you’re considering TNL for your portfolio, see our FREE research report to learn more.
Avery Dennison (AVY)
Trailing 12-Month Free Cash Flow Margin: 9.3%
Founded as Kum Kleen Products, Avery Dennison (NYSE: AVY) is a manufacturer of adhesive materials, display graphics, and packaging products, serving various industries.
Why Are We Hesitant About AVY?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Projected sales growth of 3.9% for the next 12 months suggests sluggish demand
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 4.3% annually
Avery Dennison’s stock price of $159.11 implies a valuation ratio of 15.5x forward P/E. Dive into our free research report to see why there are better opportunities than AVY.
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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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
