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 that don’t make the cut and some better opportunities instead.

Macy's (M)

Trailing 12-Month Free Cash Flow Margin: 3.5%

With a storied history that began with its 1858 founding, Macy’s (NYSE: M) is a department store chain that sells clothing, cosmetics, accessories, and home goods.

Why Is M Risky?

1. Recent store closures and weak same-store sales point to soft demand and an operational restructuring
2. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
3. Earnings per share have contracted by 22.4% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance

Macy’s stock price of $21.56 implies a valuation ratio of 9.9x forward P/E. Check out our free in-depth research report to learn more about why M doesn’t pass our bar.

Helios (HLIO)

Trailing 12-Month Free Cash Flow Margin: 11.3%

Founded on the principle of treating others as one wants to be treated, Helios (NYSE: HLIO) designs, manufactures, and sells motion and electronic control components for various sectors.

Why Should You Sell HLIO?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $77 per share, Helios trades at 26.6x forward P/E. To fully understand why you should be careful with HLIO, check out our full research report (it’s free).

United Airlines (UAL)

Trailing 12-Month Free Cash Flow Margin: 4.3%

Founded in 1926, United Airlines Holdings (NASDAQ: UAL) operates a global airline network, providing passenger and cargo air transportation services across domestic and international routes.

Why Do We Pass on UAL?

1. Performance surrounding its revenue passenger miles has lagged its peers
2. Poor expense management has led to an operating margin of 8.4% that is below the industry average
3. Free cash flow margin is projected to show no improvement next year

United Airlines is trading at $109.34 per share, or 8.2x forward P/E. Read our free research report to see why you should think twice about including UAL in your portfolio.

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