3 Cash-Producing Stocks with Mounting Challenges

July 14, 2025 at 00:42 AM EDT

QLYS Cover Image

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 avoid and some better opportunities instead.

Qualys (QLYS)

Trailing 12-Month Free Cash Flow Margin: 41.2%

Founded in 1999 as one of the first subscription security companies, Qualys (NASDAQ: QLYS) provides organizations with software to assess their exposure to cyber-attacks.

Why Are We Hesitant About QLYS?

Average billings growth of 5.2% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
Estimated sales growth of 6.6% for the next 12 months implies demand will slow from its three-year trend
Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 6.9 percentage points

Qualys’s stock price of $136.10 implies a valuation ratio of 7.5x forward price-to-sales. If you’re considering QLYS for your portfolio, see our FREE research report to learn more.

Gap (GAP)

Trailing 12-Month Free Cash Flow Margin: 5.8%

Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE: GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.

Why Does GAP Fall Short?

Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
Anticipated sales growth of 1.3% for the next year implies demand will be shaky
Low returns on capital reflect management’s struggle to allocate funds effectively

Gap is trading at $22.81 per share, or 9.7x forward P/E. Check out our free in-depth research report to learn more about why GAP doesn’t pass our bar.

EPAM (EPAM)

Trailing 12-Month Free Cash Flow Margin: 8.6%

Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE: EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.

Why Are We Cautious About EPAM?

Constant currency revenue growth has disappointed over the past two years and shows demand was soft
Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 7.3 percentage points
Waning returns on capital imply its previous profit engines are losing steam

At $170.56 per share, EPAM trades at 15.6x forward P/E. To fully understand why you should be careful with EPAM, check out our full research report (it’s free).

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3 Cash-Producing Stocks with Mounting Challenges

Qualys (QLYS)

Gap (GAP)

EPAM (EPAM)

High-Quality Stocks for All Market Conditions

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