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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here are three cash-producing companies to avoid and some better opportunities instead.
Bandwidth (BAND)
Trailing 12-Month Free Cash Flow Margin: 8.8%
Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ: BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.
Why Are We Out on BAND?
- Revenue increased by 11.5% annually over the last two years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Gross margin of 38.2% reflects its high servicing costs
- Operating margin was unchanged over the last year, suggesting it failed to gain leverage on its fixed costs
At $63.12 per share, Bandwidth trades at 2.5x forward price-to-sales. If you’re considering BAND for your portfolio, see our FREE research report to learn more.
AGCO (AGCO)
Trailing 12-Month Free Cash Flow Margin: 5.3%
With a history that features both organic growth and acquisitions, AGCO (NYSE: AGCO) designs, manufactures, and sells agricultural machinery and related technology.
Why Should You Sell AGCO?
- Annual sales declines of 13.9% for the past two years show its products and services struggled to connect with the market during this cycle
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
AGCO’s stock price of $113.10 implies a valuation ratio of 17.9x forward P/E. Read our free research report to see why you should think twice about including AGCO in your portfolio.
Black Stone Minerals (BSM)
Trailing 12-Month Free Cash Flow Margin: 63.5%
With roots dating to the late 1800s when railroads were expanding westward and land grants were common, Black Stone Minerals (NYSE: BSM) owns oil and natural gas mineral rights across the U.S., earning royalties when energy companies drill on its land.
Why Are We Hesitant About BSM?
- Modest revenue base of $470 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Day-to-day expenses have swelled relative to revenue over the last five years as its EBITDA margin fell by 28.1 percentage points
Black Stone Minerals is trading at $13.67 per share, or 13.6x forward P/E. Dive into our free research report to see why there are better opportunities than BSM.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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.
