Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here are three cash-producing companies to steer clear of and a few better alternatives.
Hershey (HSY)
Trailing 12-Month Free Cash Flow Margin: 15.6%
Best known for its milk chocolate bar and Hershey's Kisses, Hershey (NYSE: HSY) is an iconic company known for its chocolate products.
Why Does HSY Worry Us?
- Declining unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 13.5 percentage points
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 9.5% annually while its revenue grew
Hershey is trading at $222.78 per share, or 26.7x forward P/E. Dive into our free research report to see why there are better opportunities than HSY.
Textron (TXT)
Trailing 12-Month Free Cash Flow Margin: 6.3%
Listed on the NYSE in 1947, Textron (NYSE: TXT) provides products and services in the aerospace, defense, industrial, and finance sectors.
Why Is TXT Not Exciting?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4% over the last two years was below our standards for the industrials sector
- Earnings per share lagged its peers over the last two years as they only grew by 4.5% annually
- Free cash flow margin dropped by 3.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $92.87 per share, Textron trades at 14.7x forward P/E. Read our free research report to see why you should think twice about including TXT in your portfolio.
Progyny (PGNY)
Trailing 12-Month Free Cash Flow Margin: 14.9%
Pioneering a data-driven approach to family building that has achieved an industry-leading patient satisfaction score of +80, Progyny (NASDAQ: PGNY) provides comprehensive fertility and family building benefits solutions to employers, helping employees access quality fertility treatments and support services.
Why Are We Hesitant About PGNY?
- Smaller revenue base of $1.29 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Waning returns on capital imply its previous profit engines are losing steam
Progyny’s stock price of $18.19 implies a valuation ratio of 9.7x forward P/E. Check out our free in-depth research report to learn more about why PGNY doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
