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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Box (BOX)
Trailing 12-Month Free Cash Flow Margin: 26.9%
Known as the "Content Cloud" for managing the 90% of business data that exists as unstructured files and documents, Box (NYSE: BOX) provides a cloud-based platform that enables organizations to securely manage, share, and collaborate on their content from anywhere on any device.
Why Are We Hesitant About BOX?
- Offerings struggled to generate meaningful interest as its average billings growth of 10% over the last year did not impress
- Estimated sales growth of 7.9% for the next 12 months is soft and implies weaker demand
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
Box’s stock price of $32.40 implies a valuation ratio of 4.1x forward price-to-sales. If you’re considering BOX for your portfolio, see our FREE research report to learn more.
Flywire (FLYW)
Trailing 12-Month Free Cash Flow Margin: 16.2%
Initially created to solve the challenges of international student tuition payments, Flywire (NASDAQ: FLYW) provides specialized payment processing and software solutions that help educational institutions, healthcare systems, travel companies, and businesses manage complex payments.
Why Does FLYW Worry Us?
- High servicing costs result in a relatively inferior gross margin of 62.9% that must be offset through increased usage
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
Flywire is trading at $12.53 per share, or 2.4x forward price-to-sales. Read our free research report to see why you should think twice about including FLYW in your portfolio.
Astec (ASTE)
Trailing 12-Month Free Cash Flow Margin: 5.9%
Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ: ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.
Why Does ASTE Give Us Pause?
- Sales tumbled by 2% annually over the last two years, showing market trends are working against its favor during this cycle
- Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 28.2% declines over the past two years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $43.84 per share, Astec trades at 14.7x forward P/E. Dive into our free research report to see why there are better opportunities than ASTE.
High-Quality Stocks for All Market Conditions
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