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.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are three cash-producing companies to steer clear of and a few better alternatives.

IPG Photonics (IPGP)

Trailing 12-Month Free Cash Flow Margin: 3.8%

Both a designer and manufacturer of its products, IPG Photonics (NASDAQ: IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.

Why Do We Pass on IPGP?

1. Sales tumbled by 3.8% annually over the last five years, showing market trends are working against its favor during this cycle
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 20% annually, worse than its revenue
3. Free cash flow margin dropped by 15.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $77.63 per share, IPG Photonics trades at 56.8x forward P/E. Dive into our free research report to see why there are better opportunities than IPGP.

Columbia Sportswear (COLM)

Trailing 12-Month Free Cash Flow Margin: 5%

Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ: COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.

Why Are We Out on COLM?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Free cash flow margin is expected to remain in place over the coming year
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Columbia Sportswear’s stock price of $54.33 implies a valuation ratio of 18.3x forward P/E. To fully understand why you should be careful with COLM, check out our full research report (it’s free for active Edge members).

Oshkosh (OSK)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Oshkosh (NYSE: OSK) manufactures specialty vehicles for the defense, fire, emergency, and commercial industry, operating various brand subsidiaries within each industry.

Why Are We Cautious About OSK?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 1.9% decline in its backlog
2. High input costs result in an inferior gross margin of 16.5% that must be offset through higher volumes
3. 7 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Oshkosh is trading at $127.61 per share, or 10.7x forward P/E. Read our free research report to see why you should think twice about including OSK in your portfolio.

Stocks We Like More

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The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).

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