3 Cash-Producing Stocks in Dangerous Territory

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.

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 steer clear of and a few better alternatives.

Wayfair (W)

Trailing 12-Month Free Cash Flow Margin: 1.2%

Founded in 2002 by Niraj Shah, Wayfair (NYSE:W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.

Why Do We Avoid W?

1. Active Customers have declined by 2.1% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
2. Gross margin of 30.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
3. High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Wayfair’s stock price of $54.75 implies a valuation ratio of 14x forward EV/EBITDA. If you’re considering W for your portfolio, see our FREE research report to learn more.

Nike (NKE)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Originally selling Japanese Onitsuka Tiger sneakers as Blue Ribbon Sports, Nike (NYSE:NKE) is a global titan in athletic footwear, apparel, equipment, and accessories.

Why Should You Sell NKE?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share
2. Sales are projected to tank by 1.3% over the next 12 months as its demand continues evaporating
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Nike is trading at $72 per share, or 42.1x forward P/E. To fully understand why you should be careful with NKE, check out our full research report (it’s free).

Array (ARRY)

Trailing 12-Month Free Cash Flow Margin: 7.9%

Going public in October 2020, Array (NASDAQ:ARRY) is a global manufacturer of ground-mounting tracking systems for utility and distributed generation solar energy projects.

Why Do We Pass on ARRY?

1. Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $7.12 per share, Array trades at 10.9x forward P/E. Dive into our free research report to see why there are better opportunities than ARRY.

High-Quality Stocks for All Market Conditions

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 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.