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.
Marqeta (MQ)
Trailing 12-Month Free Cash Flow Margin: 19.2%
Powering the cards behind innovative fintech services like Block's Cash App, Marqeta (NASDAQ: MQ) provides a cloud-based platform that allows businesses to create customized payment card programs and process card transactions.
Why Are We Hesitant About MQ?
- Sales trends were unexciting over the last two years as its 6.3% annual growth was well below the typical software company
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 5.3 percentage points
Marqeta is trading at $17.48 per share, or 2.6x forward price-to-sales. To fully understand why you should be careful with MQ, check out our full research report (it’s free).
PVH (PVH)
Trailing 12-Month Free Cash Flow Margin: 6.1%
Founded in 1881 by a husband and wife duo, PVH (NYSE: PVH) is a global fashion conglomerate with iconic brands like Calvin Klein and Tommy Hilfiger.
Why Should You Dump PVH?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Low free cash flow margin of 6.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Rising returns on capital show management is making relatively better investments
At $78.15 per share, PVH trades at 6.5x forward P/E. If you’re considering PVH for your portfolio, see our FREE research report to learn more.
Callaway Golf Company (CALY)
Trailing 12-Month Free Cash Flow Margin: 13.3%
Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE: CALY) sells golf equipment and operates technology-driven golf entertainment venues.
Why Is CALY Risky?
- Annual revenue growth of 3.3% over the last five years was below our standards for the consumer discretionary sector
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 14.3% for the last two years
- Stagnant returns on capital show management has failed to improve the company’s business quality
Callaway Golf Company’s stock price of $19.39 implies a valuation ratio of 26.7x forward P/E. Check out our free in-depth research report to learn more about why CALY doesn’t pass our bar.
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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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
