While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.

Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are three cash-producing companies to avoid and some better opportunities instead.

Nature's Sunshine (NATR)

Trailing 12-Month Free Cash Flow Margin: 4.9%

Started on a kitchen table in Utah, Nature’s Sunshine (NASDAQ: NATR) manufactures and sells nutritional and personal care products.

Why Are We Cautious About NATR?

1. Products fail to spark excitement with consumers, as seen in its flat sales over the last three years
2. Smaller revenue base of $460.8 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.3%

At $16.40 per share, Nature's Sunshine trades at 20.6x forward P/E. Read our free research report to see why you should think twice about including NATR in your portfolio.

Kadant (KAI)

Trailing 12-Month Free Cash Flow Margin: 14.7%

Headquartered in Massachusetts, Kadant (NYSE: KAI) is a global supplier of high-value, critical components and engineered systems used in process industries worldwide.

Why Does KAI Fall Short?

1. Sales trends were unexciting over the last two years as its 4.9% annual growth was below the typical industrials company
2. Estimated sales growth of 3.1% for the next 12 months implies demand will slow from its two-year trend
3. Earnings per share were flat over the last two years and fell short of the peer group average

Kadant’s stock price of $340.90 implies a valuation ratio of 36.3x forward P/E. To fully understand why you should be careful with KAI, check out our full research report (it’s free).

Richardson Electronics (RELL)

Trailing 12-Month Free Cash Flow Margin: 3.7%

Founded in 1947, Richardson Electronics (NASDAQ: RELL) is a distributor of power grid and microwave tubes as well as consumables related to those products.

Why Should You Dump RELL?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 10.8% annually over the last two years
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Richardson Electronics is trading at $10.03 per share, or 250.5x forward P/E. Dive into our free research report to see why there are better opportunities than RELL.

High-Quality Stocks for All Market Conditions

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Don’t let fear keep you from great opportunities and take a look at 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).

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