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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Cable One (CABO)
Trailing 12-Month Free Cash Flow Margin: 19.2%
Founded in 1986, Cable One (NYSE: CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.
Why Do We Avoid CABO?
- Number of residential data subscribers has disappointed over the past two years, indicating weak demand for its offerings
- Earnings per share fell by 26% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Cable One’s stock price of $47.05 implies a valuation ratio of 0.2x forward price-to-sales. To fully understand why you should be careful with CABO, check out our full research report (it’s free).
Hayward (HAYW)
Trailing 12-Month Free Cash Flow Margin: 7%
Credited with introducing the first variable-speed pool pump, Hayward (NYSE: HAYW) makes residential and commercial pool equipment and accessories.
Why Are We Hesitant About HAYW?
- Muted 2% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Earnings per share have dipped by 9.6% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 8.9 percentage points
Hayward is trading at $13.70 per share, or 14.9x forward P/E. Read our free research report to see why you should think twice about including HAYW in your portfolio.
Xerox (XRX)
Trailing 12-Month Free Cash Flow Margin: 1.6%
Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ: XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.
Why Do We Think XRX Will Underperform?
- Sales trends were unexciting over the last five years as its 1.5% annual growth was below the typical business services company
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $2.56 per share, Xerox trades at 0x forward price-to-sales. If you’re considering XRX for your portfolio, see our FREE research report to learn more.
Stocks We Like More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
