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. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
DraftKings (DKNG)
Trailing 12-Month Free Cash Flow Margin: 12%
Getting its start in daily fantasy sports, DraftKings (NASDAQ: DKNG) is a digital sports entertainment and gaming company.
Why Are We Hesitant About DKNG?
- Performance surrounding its monthly unique players has lagged its peers
- Persistent operating margin losses suggest the business manages its expenses poorly
- Free cash flow margin is expected to remain in place over the coming year
DraftKings’s stock price of $34.10 implies a valuation ratio of 32.5x forward P/E. To fully understand why you should be careful with DKNG, check out our full research report (it’s free).
Hormel Foods (HRL)
Trailing 12-Month Free Cash Flow Margin: 4.4%
Best known for its SPAM brand, Hormel (NYSE: HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.
Why Should You Sell HRL?
- Shrinking unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 16.4% that must be offset through higher volumes
- Earnings per share fell by 9.2% annually over the last three years while its revenue was flat, showing each sale was less profitable
Hormel Foods is trading at $23.29 per share, or 15.6x forward P/E. If you’re considering HRL for your portfolio, see our FREE research report to learn more.
TreeHouse Foods (THS)
Trailing 12-Month Free Cash Flow Margin: 3%
Whether it be packaged crackers, broths, or beverages, Treehouse Foods (NYSE: THS) produces a wide range of private-label foods for grocery and food service customers.
Why Do We Steer Clear of THS?
- Declining unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 6.4 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
At $24 per share, TreeHouse Foods trades at 13.1x forward P/E. Check out our free in-depth research report to learn more about why THS doesn’t pass our bar.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
