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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
American Eagle (AEO)
Trailing 12-Month Free Cash Flow Margin: 3.8%
With a heavy focus on denim, American Eagle Outfitters (NYSE: AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.
Why Are We Cautious About AEO?
- Lack of new stores puts a ceiling on its growth and reflects a focus on optimizing sales at existing locations
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 3.9 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
American Eagle’s stock price of $17.57 implies a valuation ratio of 9.9x forward P/E. To fully understand why you should be careful with AEO, check out our full research report (it’s free).
American Woodmark (AMWD)
Trailing 12-Month Free Cash Flow Margin: 2.4%
Starting as a small millwork shop, American Woodmark (NASDAQ: AMWD) is a cabinet manufacturing company that helps customers from inspiration to installation.
Why Is AMWD Risky?
- Annual sales declines of 1.8% for the past five years show its products and services struggled to connect with the market during this cycle
- Projected sales decline of 8.6% over the next 12 months indicates demand will continue deteriorating
- Earnings per share have contracted by 9.9% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
American Woodmark is trading at $39.50 per share, or 25.7x forward P/E. Dive into our free research report to see why there are better opportunities than AMWD.
LeMaitre (LMAT)
Trailing 12-Month Free Cash Flow Margin: 29.8%
Founded in 1983 and named after a pioneering vascular surgeon, LeMaitre Vascular (NASDAQGM:LMAT) develops and manufactures specialized medical devices used by vascular surgeons to treat peripheral vascular disease and other circulatory conditions.
Why Are We Hesitant About LMAT?
- Revenue base of $249.6 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
At $105.84 per share, LeMaitre trades at 36.9x forward P/E. Read our free research report to see why you should think twice about including LMAT in your portfolio.
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
