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. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Getty Images (GETY)
Trailing 12-Month Free Cash Flow Margin: 6.5%
With a vast library of over 562 million visual assets documenting everything from breaking news to iconic historical moments, Getty Images (NYSE: GETY) is a global visual content marketplace that licenses photos, videos, illustrations, and music to businesses, media outlets, and creative professionals.
Why Is GETY Not Exciting?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.2 percentage points
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $1.83 per share, Getty Images trades at 7.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than GETY.
Malibu Boats (MBUU)
Trailing 12-Month Free Cash Flow Margin: 3%
Founded in California in 1982, Malibu Boats (NASDAQ: MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.
Why Should You Dump MBUU?
- Performance surrounding its boats sold has lagged its peers
- Earnings per share fell by 29% annually over the last five years while its revenue was flat, showing each sale was less profitable
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Malibu Boats’s stock price of $28.14 implies a valuation ratio of 8.6x forward price-to-earnings. Read our free research report to see why you should think twice about including MBUU in your portfolio.
Insight Enterprises (NSIT)
Trailing 12-Month Free Cash Flow Margin: 6.7%
With over 35 years of IT expertise and partnerships with more than 8,000 technology providers, Insight Enterprises (NASDAQ: NSIT) provides end-to-end digital transformation solutions that help businesses modernize their IT infrastructure and maximize the value of technology.
Why Should You Sell NSIT?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 8.7% annually over the last two years
- Projected sales growth of 1.3% for the next 12 months suggests sluggish demand
- Flat earnings per share over the last two years underperformed the sector average
Insight Enterprises is trading at $132.80 per share, or 13.1x forward price-to-earnings. To fully understand why you should be careful with NSIT, check out our full research report (it’s free).
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
