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. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

MongoDB (MDB)

Trailing 12-Month Free Cash Flow Margin: 10.5%

Named after "humongous database," reflecting its ability to handle massive data loads, MongoDB (NASDAQ: MDB) provides a flexible document-based database platform that helps developers build, deploy, and maintain modern applications more efficiently.

Why Do We Think Twice About MDB?

1. Rapid expansion strategy came at the expense of operating margin profitability
2. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.2 percentage points

At $324.11 per share, MongoDB trades at 10.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MDB.

Domino's (DPZ)

Trailing 12-Month Free Cash Flow Margin: 12.8%

Founded by two brothers in Michigan, Domino’s (NYSE: DPZ) is a globally recognized pizza chain known for its creative marketing and fast delivery.

Why Does DPZ Worry Us?

1. 5.3% annual revenue growth over the last six years was slower than its restaurant peers
2. Estimated sales growth of 5.9% for the next 12 months is soft and implies weaker demand
3. Earnings per share lagged its peers over the last five years as they only grew by 8.9% annually

Domino’s stock price of $463.01 implies a valuation ratio of 25.4x forward P/E. Check out our free in-depth research report to learn more about why DPZ doesn’t pass our bar.

Generac (GNRC)

Trailing 12-Month Free Cash Flow Margin: 11.6%

With its name deriving from a combination of “generating” and “AC”, Generac (NYSE: GNRC) offers generators and other power products for residential, industrial, and commercial use.

Why Does GNRC Fall Short?

1. Annual revenue growth of 4.7% over the last two years was below our standards for the industrials sector
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6 percentage points
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Generac is trading at $181.30 per share, or 22.3x forward P/E. To fully understand why you should be careful with GNRC, check out our full research report (it’s free).

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