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 that don’t make the cut and some better opportunities instead.

The Cheesecake Factory (CAKE)

Trailing 12-Month Free Cash Flow Margin: 3.2%

Celebrated for its delicious (and free) brown bread, gigantic portions, and delectable desserts, Cheesecake Factory (NASDAQ: CAKE) is an iconic American restaurant chain that also owns and operates a portfolio of separate restaurant brands.

Why Does CAKE Fall Short?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Operating margin of 4.3% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
3. High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

The Cheesecake Factory is trading at $56.98 per share, or 14.7x forward P/E. Check out our free in-depth research report to learn more about why CAKE doesn’t pass our bar.

Terex (TEX)

Trailing 12-Month Free Cash Flow Margin: 4%

With humble beginnings as a dump truck company, Terex (NYSE: TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.

Why Does TEX Worry Us?

1. 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
2. Earnings per share have contracted by 16.4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.1 percentage points

Terex’s stock price of $45.77 implies a valuation ratio of 9.4x forward P/E. To fully understand why you should be careful with TEX, check out our full research report (it’s free).

ANI Pharmaceuticals (ANIP)

Trailing 12-Month Free Cash Flow Margin: 9.9%

With a diverse portfolio of 116 pharmaceutical products and a growing rare disease platform, ANI Pharmaceuticals (NASDAQ: ANIP) develops, manufactures, and markets branded and generic prescription pharmaceuticals, with a focus on rare disease treatments.

Why Is ANIP Not Exciting?

1. Subscale operations are evident in its revenue base of $674.1 million, meaning it has fewer distribution channels than its larger rivals
2. Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 7 percentage points
3. Negative returns on capital show that some of its growth strategies have backfired

At $58.69 per share, ANI Pharmaceuticals trades at 9.3x forward P/E. If you’re considering ANIP for your portfolio, see our FREE research report to learn more.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. 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).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.