While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are three cash-producing companies to steer clear of and a few better alternatives.
ACV Auctions (ACVA)
Trailing 12-Month Free Cash Flow Margin: 5.4%
Founded in 2014, ACV Auctions (NYSE:ACVA) is an online auction marketplace for car dealers and wholesalers to buy and sell used cars.
Why Are We Cautious About ACVA?
- Bad unit economics and steep infrastructure costs are reflected in its low gross margin of 27.3%
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
ACV Auctions is trading at $7.67 per share, or 14.1x forward EV/EBITDA. To fully understand why you should be careful with ACVA, check out our full research report (it’s free).
Otis (OTIS)
Trailing 12-Month Free Cash Flow Margin: 11.4%
Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE:OTIS) is an elevator and escalator manufacturing, installation and service company.
Why Should You Dump OTIS?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Anticipated sales growth of 4.1% for the next year implies demand will be shaky
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 5.4% annually
Otis’s stock price of $73.69 implies a valuation ratio of 16.9x forward P/E. If you’re considering OTIS for your portfolio, see our FREE research report to learn more.
Graphic Packaging Holding (GPK)
Trailing 12-Month Free Cash Flow Margin: 1.7%
Founded in 1991, Graphic Packaging (NYSE:GPK) is a provider of paper-based packaging solutions for a wide range of products.
Why Do We Steer Clear of GPK?
- Annual sales declines of 3.3% for the past two years show its products and services struggled to connect with the market during this cycle
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Earnings per share have contracted by 29.9% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
At $11.15 per share, Graphic Packaging Holding trades at 11.8x forward P/E. Check out our free in-depth research report to learn more about why GPK doesn’t pass our bar.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.