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.

Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are three cash-producing companies to avoid and some better opportunities instead.

Campbell's (CPB)

Trailing 12-Month Free Cash Flow Margin: 7.6%

With its iconic canned soup as its cornerstone product, Campbell's (NASDAQ: CPB) is a packaged food company with an illustrious portfolio of brands.

Why Are We Wary of CPB?

1. Shrinking unit sales over the past two years suggest it might have to lower prices to stimulate growth
2. Estimated sales growth of 1.4% for the next 12 months implies demand will slow from its three-year trend
3. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.9 percentage points

At $37.77 per share, Campbell's trades at 11.7x forward price-to-earnings. To fully understand why you should be careful with CPB, check out our full research report (it’s free).

Amdocs (DOX)

Trailing 12-Month Free Cash Flow Margin: 11.5%

Powering the digital experiences of approximately 400 communications companies worldwide, Amdocs (NASDAQ: DOX) provides software and services that help telecommunications and media companies manage customer relationships, monetize services, and automate network operations.

Why Should You Sell DOX?

1. Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 2.5% for the past two years was weak
2. Estimated sales decline of 6.6% for the next 12 months implies a challenging demand environment
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.5 percentage points

Amdocs is trading at $82.11 per share, or 11.4x forward price-to-earnings. If you’re considering DOX for your portfolio, see our FREE research report to learn more.

Xerox (XRX)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ: XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.

Why Should You Dump XRX?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 7.3% annually over the last five years
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Xerox’s stock price of $4.17 implies a valuation ratio of 3.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why XRX doesn’t pass our bar.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.