While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.

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.

Box (BOX)

Trailing 12-Month Free Cash Flow Margin: 26.9%

Known as the "Content Cloud" for managing the 90% of business data that exists as unstructured files and documents, Box (NYSE: BOX) provides a cloud-based platform that enables organizations to securely manage, share, and collaborate on their content from anywhere on any device.

Why Are We Hesitant About BOX?

1. Offerings struggled to generate meaningful interest as its average billings growth of 10% over the last year did not impress
2. Estimated sales growth of 7.9% for the next 12 months is soft and implies weaker demand
3. Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses

Box’s stock price of $32.40 implies a valuation ratio of 4.1x forward price-to-sales. If you’re considering BOX for your portfolio, see our FREE research report to learn more.

Flywire (FLYW)

Trailing 12-Month Free Cash Flow Margin: 16.2%

Initially created to solve the challenges of international student tuition payments, Flywire (NASDAQ: FLYW) provides specialized payment processing and software solutions that help educational institutions, healthcare systems, travel companies, and businesses manage complex payments.

Why Does FLYW Worry Us?

1. High servicing costs result in a relatively inferior gross margin of 62.9% that must be offset through increased usage
2. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
3. Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage

Flywire is trading at $12.53 per share, or 2.4x forward price-to-sales. Read our free research report to see why you should think twice about including FLYW in your portfolio.

Astec (ASTE)

Trailing 12-Month Free Cash Flow Margin: 5.9%

Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ: ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.

Why Does ASTE Give Us Pause?

1. Sales tumbled by 2% annually over the last two years, showing market trends are working against its favor during this cycle
2. Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 28.2% declines over the past two years
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

At $43.84 per share, Astec trades at 14.7x forward P/E. Dive into our free research report to see why there are better opportunities than ASTE.

High-Quality Stocks for All Market Conditions

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