3 Cash-Producing Stocks in Hot Water

A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

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 steer clear of and a few better alternatives.

Kohl's (KSS)

Trailing 12-Month Free Cash Flow Margin: 1.1%

Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE:KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.

Why Do We Steer Clear of KSS?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $7.09 per share, Kohl's trades at 5.6x forward price-to-earnings. To fully understand why you should be careful with KSS, check out our full research report (it’s free).

Clorox (CLX)

Trailing 12-Month Free Cash Flow Margin: 9.7%

Founded in 1913 with bleach as the sole product offering, Clorox (NYSE:CLX) today is a consumer products giant whose product portfolio spans everything from bleach to skincare to salad dressing to kitty litter.

Why Does CLX Fall Short?

1. Sales stagnated over the last three years and signal the need for new growth strategies
2. Projected sales for the next 12 months are flat and suggest demand will be subdued
3. Free cash flow margin has stayed in place over the last year

Clorox is trading at $141.50 per share, or 20x forward price-to-earnings. If you’re considering CLX for your portfolio, see our FREE research report to learn more.

Sealed Air (SEE)

Trailing 12-Month Free Cash Flow Margin: 9.4%

Founded in 1960, Sealed Air Corporation (NYSE: SEE) specializes in the development and production of protective and food packaging solutions, serving a variety of industries.

Why Do We Pass on SEE?

1. Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth
2. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 12.3% annually, worse than its revenue
3. Waning returns on capital imply its previous profit engines are losing steam

Sealed Air’s stock price of $27.45 implies a valuation ratio of 8.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than SEE.

Stocks We Like More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.