A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 avoid and some better opportunities instead.
Western Digital (WDC)
Trailing 12-Month Free Cash Flow Margin: 19.2%
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Why Does WDC Fall Short?
- Sales tumbled by 9.4% annually over the last five years, showing market trends are working against its favor during this cycle
- High input costs result in an inferior gross margin of 14.9% that must be offset through higher volumes
- Low returns on capital reflect management’s struggle to allocate funds effectively
Western Digital’s stock price of $244.42 implies a valuation ratio of 26.3x forward P/E. Check out our free in-depth research report to learn more about why WDC doesn’t pass our bar.
CooperCompanies (COO)
Trailing 12-Month Free Cash Flow Margin: 10.6%
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 Are We Hesitant About COO?
- 6.7% annual revenue growth over the last two years was slower than its healthcare peers
- Free cash flow margin dropped by 7.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Underwhelming 5% return on capital reflects management’s difficulties in finding profitable growth opportunities
CooperCompanies is trading at $82.56 per share, or 17.9x forward P/E. If you’re considering COO for your portfolio, see our FREE research report to learn more.
FTI Consulting (FCN)
Trailing 12-Month Free Cash Flow Margin: 1.2%
With a team of experts deployed across 30+ countries to tackle complex business challenges, FTI Consulting (NYSE:FCN) is a global business advisory firm that helps organizations manage change, mitigate risk, and resolve disputes across financial, legal, operational, and regulatory matters.
Why Are We Cautious About FCN?
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 2.7 percentage points
- 9.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $179.69 per share, FTI Consulting trades at 20.6x forward P/E. Read our free research report to see why you should think twice about including FCN in your portfolio.
Stocks We Like More
Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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.