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.

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.

Mueller Water Products (MWA)

Trailing 12-Month Free Cash Flow Margin: 14%

As one of the oldest companies in the water infrastructure industry, Mueller (NYSE: MWA) is a provider of water infrastructure products and flow control systems for various sectors.

Why Do We Think Twice About MWA?

1. Muted 2.3% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
2. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
3. Projected sales growth of 4.1% for the next 12 months suggests sluggish demand

Mueller Water Products is trading at $25.20 per share, or 19.9x forward P/E. Read our free research report to see why you should think twice about including MWA in your portfolio.

Waters Corporation (WAT)

Trailing 12-Month Free Cash Flow Margin: 20.8%

Founded in 1958 and pioneering innovations in laboratory analysis for over six decades, Waters (NYSE: WAT) develops and manufactures analytical instruments, software, and consumables for liquid chromatography, mass spectrometry, and thermal analysis used in scientific research and quality testing.

Why Are We Hesitant About WAT?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
3. Waning returns on capital imply its previous profit engines are losing steam

Waters Corporation’s stock price of $288.91 implies a valuation ratio of 21.9x forward P/E. To fully understand why you should be careful with WAT, check out our full research report (it’s free).

U.S. Cellular (USM)

Trailing 12-Month Free Cash Flow Margin: 9.8%

Operating as a majority-owned subsidiary of Telephone and Data Systems since its founding in 1983, US Cellular (NYSE: USM) is a regional wireless telecommunications provider serving 4.6 million customers across 21 states with mobile phone, internet, and IoT services.

Why Should You Sell USM?

1. Sales tumbled by 1.6% annually over the last five years, showing market trends are working against its favor during this cycle
2. Overall productivity fell over the last five years as its plummeting sales were accompanied by a decline in its adjusted operating margin
3. Earnings per share have dipped by 18% annually over the past five years, which is concerning because stock prices follow EPS over the long term

At $68.98 per share, U.S. Cellular trades at 6.2x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why USM doesn’t pass our bar.

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