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.

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

Warner Bros. Discovery (WBD)

Trailing 12-Month Free Cash Flow Margin: 6%

Formed from the merger of WarnerMedia and Discovery, Warner Bros. Discovery (NASDAQ:WBD) is a multinational media and entertainment company, offering television networks, streaming services, and film and television production.

Why Do We Steer Clear of WBD?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.7% over the last five years was below our standards for the consumer discretionary sector
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Improving returns on capital suggest management is identifying more profitable investments

Warner Bros. Discovery is trading at $28.07 per share, or 151.3x forward P/E. Check out our free in-depth research report to learn more about why WBD doesn’t pass our bar.

Zimmer Biomet (ZBH)

Trailing 12-Month Free Cash Flow Margin: 14.1%

With a history dating back to 1927 and a presence in over 100 countries worldwide, Zimmer Biomet (NYSE:ZBH) designs and manufactures orthopedic products including knee and hip replacements, surgical tools, and robotic technologies for joint reconstruction and spine surgeries.

Why Is ZBH Not Exciting?

1. Sales trends were unexciting over the last five years as its 4.4% annual growth was below the typical healthcare company
2. Annual earnings per share growth of 2.4% underperformed its revenue over the last five years, showing its incremental sales were less profitable
3. ROIC of 4.2% reflects management’s challenges in identifying attractive investment opportunities

At $93.07 per share, Zimmer Biomet trades at 10.8x forward P/E. Read our free research report to see why you should think twice about including ZBH in your portfolio.

Avantor (AVTR)

Trailing 12-Month Free Cash Flow Margin: 6.9%

With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE:AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.

Why Are We Bearish on AVTR?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Inability to adjust its cost structure while its revenue declined over the last five years led to a 5.9 percentage point drop in the company’s adjusted operating margin
3. Sales were less profitable over the last five years as its earnings per share fell by 7.8% annually, worse than its revenue declines

Avantor’s stock price of $14.82 implies a valuation ratio of 17.2x forward P/E. Check out our free in-depth research report to learn more about why AVTR 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 Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.