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.

Marqeta (MQ)

Trailing 12-Month Free Cash Flow Margin: 17.9%

Powering the cards behind innovative fintech services like Block's Cash App, Marqeta (NASDAQ: MQ) provides a cloud-based platform that allows businesses to create customized payment card programs and process card transactions.

Why Does MQ Fall Short?

1. Sales tumbled by 12.1% annually over the last two years, showing industry trends like AI are working against its favor
2. High servicing costs result in a relatively inferior gross margin of 70.6% that must be offset through increased usage
3. Inability to adjust its cost structure while its revenue declined over the last year led to a 4 percentage point drop in the company’s operating margin

At $4.49 per share, Marqeta trades at 2.8x forward price-to-sales. To fully understand why you should be careful with MQ, check out our full research report (it’s free).

Zimmer Biomet (ZBH)

Trailing 12-Month Free Cash Flow Margin: 15.1%

With a history dating back to 1927 and a presence in over 100 countries worldwide, Zimmer Biomet (NYSE: ZBH) designs and manufactures orthopedic products including knee and hip replacements, surgical tools, and robotic technologies for joint reconstruction and spine surgeries.

Why Do We Think Twice About ZBH?

1. Muted 3% annual revenue growth over the last five years shows its demand lagged behind its healthcare peers
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 1 percentage points
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Zimmer Biomet’s stock price of $87.79 implies a valuation ratio of 10.6x forward P/E. Read our free research report to see why you should think twice about including ZBH in your portfolio.

Illumina (ILMN)

Trailing 12-Month Free Cash Flow Margin: 23.3%

Pioneering the ability to read the human genome at unprecedented speed and affordability, Illumina (NASDAQ: ILMN) develops and sells advanced DNA sequencing and microarray technologies that allow researchers and clinicians to analyze genetic variations and functions.

Why Are We Cautious About ILMN?

1. 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
2. Earnings per share fell by 2.2% annually over the last five years while its revenue grew, partly because it diluted shareholders
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Illumina is trading at $141.68 per share, or 29.5x forward P/E. Dive into our free research report to see why there are better opportunities than ILMN.

Stocks We Like More

Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.