3 Cash-Producing Stocks We’re Skeptical Of

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. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

Williams-Sonoma (WSM)

Trailing 12-Month Free Cash Flow Margin: 13.9%

Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE:WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.

Why Do We Think Twice About WSM?

1. Annual sales declines of 2.6% for the past three years show its products struggled to connect with the market
2. Store closures and disappointing same-store sales suggest demand is sluggish and it’s rightsizing its operations
3. Earnings growth underperformed the sector average over the last three years as its EPS grew by just 4.3% annually

Williams-Sonoma’s stock price of $205.56 implies a valuation ratio of 21.3x forward P/E. Check out our free in-depth research report to learn more about why WSM doesn’t pass our bar.

United Parcel Service (UPS)

Trailing 12-Month Free Cash Flow Margin: 5.1%

Trademarking its recognizable UPS Brown color, UPS (NYSE:UPS) offers package delivery, supply chain management, and freight forwarding services.

Why Do We Pass on UPS?

1. Flat sales over the last five years suggest it must find different ways to grow during this cycle
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.1 percentage points
3. Eroding returns on capital suggest its historical profit centers are aging

At $106.07 per share, United Parcel Service trades at 13.9x forward P/E. To fully understand why you should be careful with UPS, check out our full research report (it’s free).

Bread Financial (BFH)

Trailing 12-Month Free Cash Flow Margin: 55.5%

Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE:BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.

Why Are We Hesitant About BFH?

1. Sales tumbled by 1.2% annually over the last two years, showing market trends are working against it during this cycle
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 2.1% annually while its revenue grew

Bread Financial is trading at $88.52 per share, or 8.4x forward P/E. Dive into our free research report to see why there are better opportunities than BFH.

Stocks We Like More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

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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.