Yahoo Finance

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.

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 avoid and some better opportunities instead.

Hain Celestial (HAIN)

Trailing 12-Month Free Cash Flow Margin: 2.3%

Sold in over 75 countries around the world, Hain Celestial (NASDAQ:HAIN) is a natural and organic food company whose products range from snacks to teas to baby food.

Why Should You Sell HAIN?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion

2. Forecasted revenue decline of 5% for the upcoming 12 months implies demand will fall even further

3. Sales were less profitable over the last three years as its earnings per share fell by 43.9% annually, worse than its revenue declines

At $1.86 per share, Hain Celestial trades at 4.7x forward P/E. Check out our free in-depth research report to learn more about why HAIN doesn’t pass our bar.

Disney (DIS)

Trailing 12-Month Free Cash Flow Margin: 11.6%

Founded by brothers Walt and Roy, Disney (NYSE:DIS) is a multinational entertainment conglomerate, renowned for its theme parks, movies, television networks, and merchandise.

Why Is DIS Risky?

1. Sizable revenue base leads to growth challenges as its 3.7% annual revenue increases over the last five years fell short of other consumer discretionary companies

2. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 5.3 percentage points over the next year

3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Disney’s stock price of $112.25 implies a valuation ratio of 20.5x forward P/E. Read our free research report to see why you should think twice about including DIS in your portfolio, it’s free.

Crocs (CROX)

Trailing 12-Month Free Cash Flow Margin: 21.6%

Founded in 2002, Crocs (NASDAQ:CROX) sells casual footwear and is known for its iconic clog shoe.

Why Does CROX Worry Us?

1. Constant currency revenue growth has disappointed over the past two years and shows demand was soft

2. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.2 percentage points

3. Eroding returns on capital suggest its historical profit centers are aging

Crocs is trading at $116.57 per share, or 9.3x forward P/E. Dive into our free research report to see why there are better opportunities than CROX.