A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here are three cash-producing companies to steer clear of and a few better alternatives.

Kraft Heinz (KHC)

Trailing 12-Month Free Cash Flow Margin: 14.4%

The result of a 2015 mega-merger between Kraft and Heinz, Kraft Heinz (NASDAQ: KHC) is a packaged foods giant whose products span coffee to cheese to packaged meat.

Why Do We Pass on KHC?

1. Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
2. Efficiency has decreased over the last year as its operating margin fell by 34.6 percentage points
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $24.28 per share, Kraft Heinz trades at 9.8x forward P/E. Check out our free in-depth research report to learn more about why KHC doesn’t pass our bar.

Norfolk Southern (NSC)

Trailing 12-Month Free Cash Flow Margin: 19.7%

Starting with a single route from Virginia to North Carolina, Norfolk Southern (NYSE: NSC) is a freight transportation company operating a major railroad network across the eastern United States.

Why Should You Sell NSC?

1. Weak unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
2. Earnings per share were flat over the last two years and fell short of the peer group average
3. Free cash flow margin shrank by 6.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Norfolk Southern is trading at $282.90 per share, or 22.2x forward P/E. To fully understand why you should be careful with NSC, check out our full research report (it’s free for active Edge members).

Avantor (AVTR)

Trailing 12-Month Free Cash Flow Margin: 8%

With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE: AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.

Why Does AVTR Give Us Pause?

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. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Avantor’s stock price of $11.57 implies a valuation ratio of 13.1x forward P/E. If you’re considering AVTR for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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Don’t let fear keep you from great opportunities and take a look at Top 6 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).

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