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3 Cash-Producing Stocks That Fall Short
A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are three cash-producing companies to avoid and some better opportunities instead.
Power Integrations (POWI)
Trailing 12-Month Free Cash Flow Margin: 17.9%
A leading supplier of parts for electronics such as home appliances, Power Integrations (NASDAQ:POWI) is a semiconductor designer and developer specializing in products used for high-voltage power conversion.
Why Do We Think POWI Will Underperform?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Estimated sales growth of 1.9% for the next 12 months is soft and implies weaker demand
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 22.1 percentage points
At $35.90 per share, Power Integrations trades at 32.8x forward P/E. If you’re considering POWI for your portfolio, see our FREE research report to learn more.
Energizer (ENR)
Trailing 12-Month Free Cash Flow Margin: 2.1%
Masterminds behind the viral Energizer Bunny mascot, Energizer (NYSE:ENR) is one of the world's largest manufacturers of batteries.
Why Is ENR Risky?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 9.3 percentage points
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Energizer’s stock price of $19.85 implies a valuation ratio of 6x forward P/E. Check out our free in-depth research report to learn more about why ENR doesn’t pass our bar.
Laureate Education (LAUR)
Trailing 12-Month Free Cash Flow Margin: 15.6%
Founded in 1998 by Douglas L. Becker and based in Miami, Laureate Education (NASDAQ:LAUR) is a global network of higher education institutions.
Why Do We Avoid LAUR?
- Sluggish trends in its enrolled students suggest customers aren’t adopting its solutions as quickly as the company hoped
- Earnings per share fell by 9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Poor free cash flow margin of 14.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Laureate Education is trading at $33.86 per share, or 17.6x forward P/E. Dive into our free research report to see why there are better opportunities than LAUR.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum 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 Comfort Systems (+782% 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.