A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 to avoid and some better opportunities instead.
Tenable (TENB)
Trailing 12-Month Free Cash Flow Margin: 26%
Founded in 2002 by three cybersecurity veterans, Tenable (NASDAQ: TENB) provides software as a service that helps companies understand where they are exposed to cyber security risk and how to reduce it.
Why Do We Think Twice About TENB?
- Annual revenue growth of 16.9% over the last three years was below our standards for the software sector
- Estimated sales growth of 7.5% for the next 12 months implies demand will slow from its three-year trend
- Persistent operating losses suggest the business manages its expenses poorly
Tenable’s stock price of $31.83 implies a valuation ratio of 3.8x forward price-to-sales. To fully understand why you should be careful with TENB, check out our full research report (it’s free).
General Motors (GM)
Trailing 12-Month Free Cash Flow Margin: 7%
Founded in 1908 by William C. Durant, General Motors (NYSE: GM) offers a range of vehicles and automobiles through brands such as Chevrolet, Buick, GMC, and Cadillac.
Why Is GM Not Exciting?
- Disappointing unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Sales are projected to tank by 6.2% over the next 12 months as demand evaporates
- Gross margin of 12.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
At $45.50 per share, General Motors trades at 4.2x forward P/E. Dive into our free research report to see why there are better opportunities than GM.
CooperCompanies (COO)
Trailing 12-Month Free Cash Flow Margin: 9.8%
With a history dating back to 1958 and a portfolio spanning two distinct healthcare segments, Cooper Companies (NASDAQ: COO) develops and manufactures medical devices focused on vision care through contact lenses and women's health including fertility products and services.
Why Does COO Fall Short?
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share grew slower than its revenue
- ROIC of 4.9% reflects management’s challenges in identifying attractive investment opportunities
CooperCompanies is trading at $80.01 per share, or 19.9x forward P/E. If you’re considering COO for your portfolio, see our FREE research report to learn more.
Stocks That Overcame Trump’s 2018 Tariffs
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
