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. Keeping that in mind, here are three cash-producing companies to steer clear of and a few better alternatives.

Shyft (SHYF)

Trailing 12-Month Free Cash Flow Margin: 2.1%

Notably receiving an order from FedEx for electric vehicles, Shyft (NASDAQ: SHYF) offers specialty vehicles and truck bodies for various industries.

Why Is SHYF Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 13.7% annually over the last two years
2. Free cash flow margin shrank by 6.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Shyft is trading at $8.74 per share, or 8.1x forward P/E. To fully understand why you should be careful with SHYF, check out our full research report (it’s free).

Surgery Partners (SGRY)

Trailing 12-Month Free Cash Flow Margin: 6.7%

With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ: SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.

Why Are We Cautious About SGRY?

1. Disappointing unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.2 percentage points
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $22.43 per share, Surgery Partners trades at 21.6x forward P/E. Read our free research report to see why you should think twice about including SGRY in your portfolio.

SAIC (SAIC)

Trailing 12-Month Free Cash Flow Margin: 6.8%

With over five decades of experience supporting national security missions, Science Applications International Corporation (NASDAQ: SAIC) provides technical, engineering, and enterprise IT services primarily to U.S. government agencies and military branches.

Why Do We Think SAIC Will Underperform?

1. Annual sales declines of 1.5% for the past two years show its products and services struggled to connect with the market during this cycle
2. Estimated sales growth of 2.7% for the next 12 months is soft and implies weaker demand
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

SAIC’s stock price of $119.41 implies a valuation ratio of 13.1x forward P/E. Check out our free in-depth research report to learn more about why SAIC doesn’t pass our bar.

Stocks That Overcame Trump’s 2018 Tariffs

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 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.