A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 steer clear of and a few better alternatives.
Elastic (ESTC)
Trailing 12-Month Free Cash Flow Margin: 18.5%
Built on the powerful open-source Elasticsearch technology that powers search functionality for thousands of websites worldwide, Elastic (NYSE: ESTC) provides a search and AI platform that helps organizations find insights from their data, monitor applications, and protect against security threats.
Why Are We Hesitant About ESTC?
- Estimated sales growth of 14.6% for the next 12 months implies demand will slow from its two-year trend
- Straightforward implementation process helps new customers realize value quickly, supporting healthy payback periods on sales investments
- Operating margin expanded by 1.8 percentage points over the last year as it scaled and became more efficient
Elastic is trading at $64.89 per share, or 3.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ESTC.
Commvault (CVLT)
Trailing 12-Month Free Cash Flow Margin: 21.3%
Born from the need to create ironclad protection in an increasingly dangerous digital world, Commvault (NASDAQ: CVLT) provides data protection and cyber resilience software that helps organizations secure, back up, and recover their data across on-premises, hybrid, and multi-cloud environments.
Why Is CVLT Not Exciting?
- Products, pricing, or go-to-market strategy may need some adjustments as its 12.2% average billings growth over the last year was weak
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Efficiency fell over the last year as its operating margin declined by 1.5 percentage points because it pursued growth instead of profits
Commvault’s stock price of $116.73 implies a valuation ratio of 3.7x forward price-to-sales. Check out our free in-depth research report to learn more about why CVLT doesn’t pass our bar.
Utz (UTZ)
Trailing 12-Month Free Cash Flow Margin: 2.9%
Tracing its roots back to 1921 when Bill and Salie Utz began making potato chips in their kitchen, Utz Brands (NYSE: UTZ) offers salty snacks such as potato chips, tortilla chips, pretzels, cheese snacks, and ready-to-eat popcorn, among others.
Why Are We Bearish on UTZ?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Revenue base of $1.45 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- ROIC of 0.2% reflects management’s challenges in identifying attractive investment opportunities
At $14.08 per share, Utz trades at 17.6x forward P/E. If you’re considering UTZ for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
