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.
Levi's (LEVI)
Trailing 12-Month Free Cash Flow Margin: 5.9%
Credited for inventing the first pair of blue jeans in 1873, Levi's (NYSE: LEVI) is an apparel company renowned for its iconic denim products and classic American style.
Why Do We Think LEVI Will Underperform?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Estimated sales growth of 2.6% for the next 12 months is soft and implies weaker demand
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $21.28 per share, Levi's trades at 16.6x forward P/E. Check out our free in-depth research report to learn more about why LEVI doesn’t pass our bar.
Whirlpool (WHR)
Trailing 12-Month Free Cash Flow Margin: 1.6%
Credited with introducing the first automatic washing machine, Whirlpool (NYSE: WHR) is a manufacturer of a variety of home appliances.
Why Do We Steer Clear of WHR?
- Underwhelming unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- 9× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Whirlpool is trading at $88.09 per share, or 8.6x forward P/E. Dive into our free research report to see why there are better opportunities than WHR.
Repligen (RGEN)
Trailing 12-Month Free Cash Flow Margin: 16.2%
With over 13 strategic acquisitions since 2012 to build its comprehensive bioprocessing portfolio, Repligen (NASDAQ: RGEN) develops and manufactures specialized technologies that improve the efficiency and flexibility of biological drug manufacturing processes.
Why Do We Pass on RGEN?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 16.9 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Repligen’s stock price of $120 implies a valuation ratio of 65.5x forward P/E. If you’re considering RGEN for your portfolio, see our FREE research report to learn more.
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