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.

Hasbro (HAS)

Trailing 12-Month Free Cash Flow Margin: 14.5%

Credited with the creation of toys such as Mr. Potato Head and the Rubik’s Cube, Hasbro (NASDAQ: HAS) is a global entertainment company offering a diverse range of toys, games, and multimedia experiences for children and families.

Why Do We Steer Clear of HAS?

1. Sales tumbled by 3.5% annually over the last five years, showing consumer trends are working against its favor
2. Persistent operating margin losses suggest the business manages its expenses poorly
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $71.81 per share, Hasbro trades at 16.9x forward P/E. Dive into our free research report to see why there are better opportunities than HAS.

Sealed Air (SEE)

Trailing 12-Month Free Cash Flow Margin: 7.8%

Founded in 1960, Sealed Air Corporation (NYSE: SEE) specializes in the development and production of protective and food packaging solutions, serving a variety of industries.

Why Do We Pass on SEE?

1. Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Eroding returns on capital suggest its historical profit centers are aging

Sealed Air is trading at $30.79 per share, or 10.1x forward P/E. Read our free research report to see why you should think twice about including SEE in your portfolio.

Delta (DAL)

Trailing 12-Month Free Cash Flow Margin: 4.6%

One of the ‘Big Four’ airlines in the US, Delta Air Lines (NYSE: DAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.

Why Do We Avoid DAL?

1. Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
2. Estimated sales decline of 1.1% for the next 12 months implies a challenging demand environment
3. Negative returns on capital show that some of its growth strategies have backfired

Delta’s stock price of $49.40 implies a valuation ratio of 7.8x forward P/E. If you’re considering DAL for your portfolio, see our FREE research report to learn more.

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