3 Cash-Producing Stocks in Hot Water

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.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are three cash-producing companies to avoid and some better opportunities instead.

Starbucks (SBUX)

Trailing 12-Month Free Cash Flow Margin: 8%

Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ:SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.

Why Are We Wary of SBUX?

1. Annual sales growth of 6% over the last five years lagged behind its restaurant peers as its large revenue base made it difficult to generate incremental demand
2. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.7 percentage points
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 3.9 percentage points

Starbucks is trading at $81.25 per share, or 25x forward price-to-earnings. Read our free research report to see why you should think twice about including SBUX in your portfolio.

WillScot Mobile Mini (WSC)

Trailing 12-Month Free Cash Flow Margin: 21%

Originally focusing on mobile offices for construction sites, WillScot (NASDAQ:WSC) provides ready-to-use temporary spaces, largely for longer-term lease.

Why Is WSC Not Exciting?

1. Annual revenue growth of 5.7% over the last two years was below our standards for the industrials sector
2. Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $23.32 per share, WillScot Mobile Mini trades at 13x forward price-to-earnings. To fully understand why you should be careful with WSC, check out our full research report (it’s free).

Genco (GNK)

Trailing 12-Month Free Cash Flow Margin: 23.9%

Headquartered in NYC, Genco (NYSE:GNK) is a shipping company that transports dry bulk cargo along worldwide maritime routes.

Why Does GNK Worry Us?

1. Number of owned vessels has disappointed over the past two years, indicating weak demand for its offerings
2. Projected sales decline of 15.3% over the next 12 months indicates demand will continue deteriorating
3. Performance over the past two years was negatively impacted by new share issuances as its earnings per share dropped by 34.7% annually, worse than its revenue

Genco’s stock price of $13.05 implies a valuation ratio of 17.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than GNK.

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.