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 that don’t make the cut and some better opportunities instead.

Manhattan Associates (MANH)

Trailing 12-Month Free Cash Flow Margin: 29.1%

Boasting major consumer staples and pharmaceutical companies as clients, Manhattan Associates (NASDAQ: MANH) offers a software-as-service platform that helps customers manage their supply chains.

Why Are We Wary of MANH?

1. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 5.7% underwhelmed
2. Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its three-year trend
3. Bad unit economics and steep infrastructure costs are reflected in its gross margin of 56.3%, one of the worst among software companies

Manhattan Associates is trading at $216 per share, or 11.9x forward price-to-sales. Read our free research report to see why you should think twice about including MANH in your portfolio.

Papa John's (PZZA)

Trailing 12-Month Free Cash Flow Margin: 2.8%

Founded by the eclectic John “Papa John” Schnatter, Papa John’s (NASDAQ: PZZA) is a globally recognized pizza delivery and carryout chain known for “better ingredients” and “better pizza”.

Why Do We Think Twice About PZZA?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
2. Estimated sales growth of 1.8% for the next 12 months implies demand will slow from its six-year trend
3. Gross margin of 14.8% reflects the bad unit economics inherent in most restaurant businesses

Papa John’s stock price of $47.99 implies a valuation ratio of 22.9x forward P/E. Check out our free in-depth research report to learn more about why PZZA doesn’t pass our bar.

Kyndryl (KD)

Trailing 12-Month Free Cash Flow Margin: 2.3%

Born from IBM's managed infrastructure services business in a 2021 spinoff, Kyndryl (NYSE: KD) is the world's largest IT infrastructure services provider that designs, builds, and manages technology environments for enterprise customers.

Why Does KD Fall Short?

1. Sales tumbled by 4.6% annually over the last five years, showing market trends are working against its favor during this cycle
2. Poor free cash flow margin of 1.4% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Push for growth has led to negative returns on capital, signaling value destruction

At $30.38 per share, Kyndryl trades at 11.3x forward P/E. Read our free research report to see why you should think twice about including KD in your portfolio.

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