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. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

Microchip Technology (MCHP)

Trailing 12-Month Free Cash Flow Margin: 17.5%

Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.

Why Are We Out on MCHP?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 3.6% annually over the last five years
2. Inability to adjust its cost structure while its revenue declined over the last five years led to a 11.6 percentage point drop in the company’s operating margin
3. Free cash flow margin shrank by 16 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Microchip Technology is trading at $70 per share, or 61.6x forward P/E. Read our free research report to see why you should think twice about including MCHP in your portfolio.

Frontdoor (FTDR)

Trailing 12-Month Free Cash Flow Margin: 14.5%

Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor (NASDAQ: FTDR) is a provider of home warranty and service plans.

Why Is FTDR Not Exciting?

1. Sluggish trends in its home service plans suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Free cash flow margin is forecasted to shrink by 2.4 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Frontdoor’s stock price of $56.73 implies a valuation ratio of 18.6x forward P/E. Dive into our free research report to see why there are better opportunities than FTDR.

Casella Waste Systems (CWST)

Trailing 12-Month Free Cash Flow Margin: 11.6%

Starting with the founder picking up garbage with a pickup truck he purchased using savings from high school, Casella (NASDAQ: CWST) offers waste management services for businesses, residents, and the government.

Why Does CWST Worry Us?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Efficiency has decreased over the last five years as its operating margin fell by 4 percentage points
3. Earnings per share were flat while its revenue grew over the last two years, partly because it issued new shares

At $117.15 per share, Casella Waste Systems trades at 97.1x forward P/E. If you’re considering CWST for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.