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.
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 that don’t make the cut and some better opportunities instead.
Flowserve (FLS)
Trailing 12-Month Free Cash Flow Margin: 5.1%
Manufacturing the largest pump ever built for nuclear power generation, Flowserve (NYSE: FLS) manufactures and sells flow control equipment for various industries.
Why Do We Think Twice About FLS?
- Backlog growth averaged a weak 3.6% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 5.9% annually
- Poor free cash flow margin of 4.2% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Flowserve’s stock price of $51.88 implies a valuation ratio of 16.1x forward P/E. To fully understand why you should be careful with FLS, 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 Think ARCB Will Underperform?
- Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
- Earnings per share have contracted by 32.9% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Eroding returns on capital suggest its historical profit centers are aging
At $74.59 per share, ArcBest trades at 11.7x forward P/E. If you’re considering ARCB for your portfolio, see our FREE research report to learn more.
Vishay Precision (VPG)
Trailing 12-Month Free Cash Flow Margin: 3.6%
Emerging from Vishay Intertechnology in 2010, Vishay Precision (NYSE: VPG) operates as a global provider of precision measurement and sensing technologies.
Why Do We Pass on VPG?
- Sales tumbled by 9.6% annually over the last two years, showing market trends are working against its favor during this cycle
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 6.3 percentage points
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 16.2% annually
Vishay Precision is trading at $27.99 per share, or 23.2x forward P/E. Check out our free in-depth research report to learn more about why VPG doesn’t pass our bar.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
