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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 avoid and some better opportunities instead.

Starbucks (SBUX)

Trailing 12-Month Free Cash Flow Margin: 8%

Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ:SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.

Why Are We Wary of SBUX?

1. Annual sales growth of 6% over the last five years lagged behind its restaurant peers as its large revenue base made it difficult to generate incremental demand

2. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.7 percentage points

3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 3.9 percentage points

Starbucks is trading at $81.25 per share, or 25x forward price-to-earnings. Read our free research report to see why you should think twice about including SBUX in your portfolio, it’s free.

WillScot Mobile Mini (WSC)

Trailing 12-Month Free Cash Flow Margin: 21%

Originally focusing on mobile offices for construction sites, WillScot (NASDAQ:WSC) provides ready-to-use temporary spaces, largely for longer-term lease.

Why Is WSC Not Exciting?

1. Annual revenue growth of 5.7% over the last two years was below our standards for the industrials sector

2. Demand is forecasted to shrink as its estimated sales for the next 12 months are flat

3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $23.32 per share, WillScot Mobile Mini trades at 13x forward price-to-earnings. If you’re considering WSC for your portfolio, see our FREE research report to learn more.

Genco (GNK)

Trailing 12-Month Free Cash Flow Margin: 23.9%

Headquartered in NYC, Genco (NYSE:GNK) is a shipping company that transports dry bulk cargo along worldwide maritime routes.

Why Does GNK Worry Us?

1. Number of owned vessels has disappointed over the past two years, indicating weak demand for its offerings

2. Projected sales decline of 15.3% over the next 12 months indicates demand will continue deteriorating

3. Performance over the past two years was negatively impacted by new share issuances as its earnings per share dropped by 34.7% annually, worse than its revenue

Genco’s stock price of $13.05 implies a valuation ratio of 17.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than GNK.