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.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are three cash-producing companies to steer clear of and a few better alternatives.

Zillow (ZG)

Trailing 12-Month Free Cash Flow Margin: 13.5%

Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ: ZG) is the leading U.S. online real estate marketplace.

Why Are We Out on ZG?

1. Annual revenue declines of 7.6% over the last five years indicate problems with its market positioning
2. Historical operating margin losses point to an inefficient cost structure
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Zillow is trading at $67.15 per share, or 35.2x forward P/E. To fully understand why you should be careful with ZG, check out our full research report (it’s free).

Teladoc (TDOC)

Trailing 12-Month Free Cash Flow Margin: 11.3%

Founded to help people in rural areas get online medical consultations, Teladoc Health (NYSE: TDOC) is a telemedicine platform that facilitates remote doctor’s visits.

Why Does TDOC Give Us Pause?

1. Muted 6% annual revenue growth over the last three years shows its demand lagged behind its consumer internet peers
2. Decision to emphasize platform growth over monetization has contributed to 5.3% annual declines in its average revenue per user
3. Forecasted revenue decline of 1.3% for the upcoming 12 months implies demand will fall off a cliff

At $7.10 per share, Teladoc trades at 4.1x forward EV/EBITDA. Check out our free in-depth research report to learn more about why TDOC doesn’t pass our bar.

GoodRx (GDRX)

Trailing 12-Month Free Cash Flow Margin: 18.8%

Started in 2011 to tackle the problem of high prescription drug costs in America, GoodRx (NASDAQ: GDRX) operates a digital platform that helps consumers find lower prices on prescription medications through price comparison tools and discount codes.

Why Do We Pass on GDRX?

1. 3.3% annual revenue growth over the last two years was slower than its healthcare peers
2. Revenue base of $797.4 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
3. Push for growth has led to negative returns on capital, signaling value destruction

GoodRx’s stock price of $4.39 implies a valuation ratio of 10.3x forward P/E. Dive into our free research report to see why there are better opportunities than GDRX.

Stocks We Like More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today