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. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
CSX (CSX)
Trailing 12-Month Free Cash Flow Margin: 19.5%
Established as part of the Chessie System and Seaboard Coast Line Industries merger, CSX (NASDAQ: CSX) is a transportation company specializing in freight rail services.
Why Should You Sell CSX?
- Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 15.6 percentage points
CSX’s stock price of $32.70 implies a valuation ratio of 17.8x forward P/E. If you’re considering CSX for your portfolio, see our FREE research report to learn more.
Lennar (LEN)
Trailing 12-Month Free Cash Flow Margin: 4.5%
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Do We Steer Clear of LEN?
- Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 22.1% declines over the past two years
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 10.8% annually
- 13.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $113.99 per share, Lennar trades at 8.8x forward P/E. Dive into our free research report to see why there are better opportunities than LEN.
UL Solutions (ULS)
Trailing 12-Month Free Cash Flow Margin: 10.5%
Founded in 1894 as a response to the growing dangers of electricity in American homes and businesses, UL Solutions (NYSE: ULS) provides testing, inspection, and certification services that help companies ensure their products meet safety, security, and sustainability standards.
Why Does ULS Worry Us?
- Muted 4.3% annual revenue growth over the last three years shows its demand lagged behind its business services peers
UL Solutions is trading at $70.14 per share, or 40.1x forward P/E. To fully understand why you should be careful with ULS, check out our full research report (it’s free).
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 Strong Momentum Stocks for this week. 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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
