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 that don’t make the cut and some better opportunities instead.
Golden Entertainment (GDEN)
Trailing 12-Month Free Cash Flow Margin: 8.4%
Founded in 2001, Golden Entertainment (NASDAQ: GDEN) is a gaming company operating casinos, taverns, and distributed gaming platforms.
Why Is GDEN Risky?
- Annual revenue declines of 2.5% over the last five years indicate problems with its market positioning
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Golden Entertainment’s stock price of $27.04 implies a valuation ratio of 33.1x forward P/E. If you’re considering GDEN for your portfolio, see our FREE research report to learn more.
Jabil (JBL)
Trailing 12-Month Free Cash Flow Margin: 4.4%
With manufacturing facilities spanning the globe from China to Mexico to the United States, Jabil (NYSE: JBL) provides electronics design, manufacturing, and supply chain solutions to companies across various industries, from healthcare to automotive to cloud computing.
Why Does JBL Give Us Pause?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.6% annually over the last two years
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 9.2% annually
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.4% for the last five years
At $224.54 per share, Jabil trades at 18.8x forward P/E. Dive into our free research report to see why there are better opportunities than JBL.
Donaldson (DCI)
Trailing 12-Month Free Cash Flow Margin: 10.9%
Playing a vital role in the historic Apollo 11 mission, Donaldson (NYSE: DCI) manufacturers and sells filtration equipment for various industries.
Why Are We Cautious About DCI?
- Muted 4.2% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.7%
Donaldson is trading at $91.11 per share, or 2.8x forward price-to-sales. Read our free research report to see why you should think twice about including DCI in your portfolio.
Stocks We Like More
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