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. That said, here are three cash-producing companies to steer clear of and a few better alternatives.

DocuSign (DOCU)

Trailing 12-Month Free Cash Flow Margin: 30.2%

Creating the digital equivalent of "sign on the dotted line" for over a billion users worldwide, DocuSign (NASDAQ: DOCU) provides an agreement management platform that enables businesses to electronically prepare, sign, and manage documents and contracts.

Why Do We Think Twice About DOCU?

1. Average ARR growth of 8.3% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 6.6%
3. Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage

At $69.69 per share, DocuSign trades at 4.4x forward price-to-sales. Check out our free in-depth research report to learn more about why DOCU doesn’t pass our bar.

Woodward (WWD)

Trailing 12-Month Free Cash Flow Margin: 8.1%

Initially designing controls for water wheels in the early 1900s, Woodward (NASDAQ: WWD) designs, services, and manufactures energy control products and optimization solutions.

Why Is WWD Not Exciting?

1. Annual revenue growth of 4.9% over the last five years was below our standards for the industrials sector
2. Earnings growth underperformed the sector average over the last five years as its EPS grew by just 7.1% annually
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.2 percentage points

Woodward is trading at $249.18 per share, or 33.4x forward P/E. To fully understand why you should be careful with WWD, check out our full research report (it’s free for active Edge members).

Taylor Morrison Home (TMHC)

Trailing 12-Month Free Cash Flow Margin: 5.8%

Named “America’s Most Trusted Home Builder” in 2019, Taylor Morrison Home (NYSE: TMHC) builds single family homes and communities across the United States.

Why Do We Think TMHC Will Underperform?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 12.7% decline in its backlog
2. Forecasted revenue decline of 8.4% for the upcoming 12 months implies demand will fall off a cliff
3. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

Taylor Morrison Home’s stock price of $61.30 implies a valuation ratio of 8.7x forward P/E. Check out our free in-depth research report to learn more about why TMHC doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.