Nasdaq
华尔街日报3 Cash-Producing Stocks with Questionable Fundamentals
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.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Herbalife (HLF)
Trailing 12-Month Free Cash Flow Margin: 4.4%
With the first products sold out of the trunk of the founder’s car, Herbalife (NYSE:HLF) today offers a portfolio of shakes, supplements, personal care products, and weight management programs to help customers reach their nutritional and fitness goals.
Why Is HLF Not Exciting?
- Falling unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Estimated sales growth of 2.9% for the next 12 months is soft and implies weaker demand
- Issuance of new shares over the last three years caused its earnings per share to fall by 15.9% annually, even worse than its revenue declines
At $14.25 per share, Herbalife trades at 5.5x forward P/E. Check out our free in-depth research report to learn more about why HLF doesn’t pass our bar.
Artivion (AORT)
Trailing 12-Month Free Cash Flow Margin: 4.1%
Formerly known as CryoLife until its 2022 rebranding, Artivion (NYSE:AORT) develops and manufactures medical devices and preserves human tissues used in cardiac and vascular surgical procedures for patients with aortic disease.
Why Does AORT Worry Us?
- Modest revenue base of $422.6 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0.1% for the last five years
- ROIC of 2.3% reflects management’s challenges in identifying attractive investment opportunities
Artivion’s stock price of $47.18 implies a valuation ratio of 60.5x forward P/E. If you’re considering AORT for your portfolio, see our FREE research report to learn more.
Brookdale (BKD)
Trailing 12-Month Free Cash Flow Margin: 1.3%
With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE:BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.
Why Are We Wary of BKD?
- Sales tumbled by 2.6% annually over the last five years, showing market trends are working against its favor during this cycle
- Forecasted revenue decline of 6.1% for the upcoming 12 months implies demand will fall off a cliff
- 12× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Brookdale is trading at $10.56 per share, or 16.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including BKD in your portfolio.
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