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. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Global Business Travel (GBTG)
Trailing 12-Month Free Cash Flow Margin: 6.9%
Holding close ties to American Express, Global Business Travel (NYSE: GBTG) is a comprehensive travel and expense management services provider to corporations worldwide.
Why Are We Wary of GBTG?
- Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 60.8% reflects its relatively high servicing costs
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Global Business Travel is trading at $6.50 per share, or 1.3x forward price-to-sales. Read our free research report to see why you should think twice about including GBTG in your portfolio.
Applied Industrial (AIT)
Trailing 12-Month Free Cash Flow Margin: 9.8%
Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE: AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.
Why Do We Think Twice About AIT?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5%
- Free cash flow margin has stayed in place over the last five years
At $229.13 per share, Applied Industrial trades at 21.4x forward P/E. Dive into our free research report to see why there are better opportunities than AIT.
Ziff Davis (ZD)
Trailing 12-Month Free Cash Flow Margin: 16.3%
Originally a pioneering technology publisher founded in 1927 that became famous for PC Magazine, Ziff Davis (NASDAQ: ZD) operates a portfolio of digital media brands and subscription services across technology, shopping, gaming, healthcare, and cybersecurity markets.
Why Is ZD Risky?
- Sales were flat over the last five years, indicating it’s failed to expand this cycle
- Sales over the last five years were less profitable as its earnings per share fell by 1.6% annually while its revenue was flat
- Free cash flow margin dropped by 17.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Ziff Davis’s stock price of $32.81 implies a valuation ratio of 4.6x forward P/E. To fully understand why you should be careful with ZD, check out our full research report (it’s free).
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
