A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are three cash-producing companies to avoid and some better opportunities instead.
Bandwidth (BAND)
Trailing 12-Month Free Cash Flow Margin: 7.4%
Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ:BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.
Why Are We Wary of BAND?
- 12.9% annual revenue growth over the last two years was slower than its software peers
- Gross margin of 38.8% reflects its high servicing costs
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
At $13.01 per share, Bandwidth trades at 0.5x forward price-to-sales. Check out our free in-depth research report to learn more about why BAND doesn’t pass our bar.
Conagra (CAG)
Trailing 12-Month Free Cash Flow Margin: 7.8%
Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.
Why Are We Out on CAG?
- Falling unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Sales are projected to be flat over the next 12 months and imply weak demand
- Sales were less profitable over the last three years as its earnings per share fell by 9.9% annually, worse than its revenue declines
Conagra is trading at $19.96 per share, or 10.9x forward P/E. Dive into our free research report to see why there are better opportunities than CAG.
Kforce (KFRC)
Trailing 12-Month Free Cash Flow Margin: 3.5%
With nearly 60 years of matching skilled professionals with the right opportunities, Kforce (NYSE:KFRC) is a professional staffing company that specializes in placing technology and finance experts with businesses on both temporary and permanent bases.
Why Do We Pass on KFRC?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1% annually over the last five years
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Diminishing returns on capital suggest its earlier profit pools are drying up
Kforce’s stock price of $30.77 implies a valuation ratio of 15.3x forward P/E. Read our free research report to see why you should think twice about including KFRC in your portfolio.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
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