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 to avoid and some better opportunities instead.
Chewy (CHWY)
Trailing 12-Month Free Cash Flow Margin: 4.5%
Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE:CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.
Why Does CHWY Fall Short?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 7.6% over the last three years was below our standards for the consumer internet sector
- Projected sales growth of 8.6% for the next 12 months suggests sluggish demand
- Gross margin of 29.5% reflects its high servicing costs
At $23.61 per share, Chewy trades at 11x forward EV/EBITDA. If you’re considering CHWY for your portfolio, see our FREE research report to learn more.
Revvity (RVTY)
Trailing 12-Month Free Cash Flow Margin: 17.9%
Formerly known as PerkinElmer until its rebranding in 2023, Revvity (NYSE:RVTY) provides health science technologies and services that support the complete workflow from discovery to development and diagnosis to cure.
Why Do We Think RVTY Will Underperform?
- 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
- Adjusted operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 14.7% annually, worse than its revenue
Revvity’s stock price of $99.10 implies a valuation ratio of 18.1x forward P/E. To fully understand why you should be careful with RVTY, check out our full research report (it’s free).
Robert Half (RHI)
Trailing 12-Month Free Cash Flow Margin: 4.1%
With roots dating back to 1948 as the first specialized recruiting firm for accounting and finance professionals, Robert Half (NYSE:RHI) provides specialized talent solutions and business consulting services, connecting skilled professionals with companies across various fields.
Why Do We Steer Clear of RHI?
- Sales tumbled by 6.9% annually over the last two years, showing market trends are working against its favor during this cycle
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 14.8% annually while its revenue grew
- Waning returns on capital imply its previous profit engines are losing steam
Robert Half is trading at $27.02 per share, or 17x forward P/E. If you’re considering RHI for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.