A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

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 that don’t make the cut and some better opportunities instead.

Skyworks Solutions (SWKS)

Trailing 12-Month Free Cash Flow Margin: 34.2%

Result of a merger of Alpha Industries and the wireless communications division of Conexant, Skyworks Solutions (NASDAQ: SWKS) is a designer and manufacturer of chips used in smartphones, autos, and industrial applications to amplify, filter, and process wireless signals.

Why Do We Pass on SWKS?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 12.2% annually over the last two years
2. Sales are projected to tank by 8.5% over the next 12 months as its demand continues evaporating
3. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 19.2 percentage points

At $70.56 per share, Skyworks Solutions trades at 18.1x forward P/E. If you’re considering SWKS for your portfolio, see our FREE research report to learn more.

Dole (DOLE)

Trailing 12-Month Free Cash Flow Margin: 1.2%

Known for its delicious pineapples and Hawaiian roots, Dole (NYSE: DOLE) is a global agricultural company specializing in fresh fruits and vegetables.

Why Do We Steer Clear of DOLE?

1. Sales tumbled by 2% annually over the last three years, showing consumer trends are working against its favor
2. Estimated sales growth of 1.9% for the next 12 months is soft and implies weaker demand
3. Gross margin of 8.4% is an output of its commoditized products

Dole’s stock price of $13.33 implies a valuation ratio of 10.1x forward P/E. To fully understand why you should be careful with DOLE, check out our full research report (it’s free).

Whirlpool (WHR)

Trailing 12-Month Free Cash Flow Margin: 3.7%

Credited with introducing the first automatic washing machine, Whirlpool (NYSE: WHR) is a manufacturer of a variety of home appliances.

Why Do We Avoid WHR?

1. Disappointing unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. 9× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Whirlpool is trading at $77.57 per share, or 8.3x forward P/E. Read our free research report to see why you should think twice about including WHR in your portfolio.

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