3 Cash-Producing Stocks We're Skeptical Of

A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are three cash-producing companies to avoid and some better opportunities instead.

Unity (U)

Trailing 12-Month Free Cash Flow Margin: 21.8%

Powering over half of the world's mobile games and expanding into industries from automotive to architecture, Unity (NYSE:U) provides software tools and services that allow developers to create, run, and monetize interactive 2D and 3D content across multiple platforms.

Why Are We Cautious About U?

1. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 3.3% underwhelmed
2. Projected sales growth of 12.5% for the next 12 months suggests sluggish demand
3. Poor expense management has led to operating margin losses

Unity is trading at $21.13 per share, or 4.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than U.

Advanced Energy (AEIS)

Trailing 12-Month Free Cash Flow Margin: 7%

Pioneering technologies for radio frequency power delivery, Advanced Energy (NASDAQ:AEIS) provides power supplies, thermal management systems, and measurement and control instruments for various manufacturing processes.

Why Are We Hesitant About AEIS?

1. Annual revenue growth of 4.2% over the last two years was below our standards for the industrials sector
2. Earnings growth underperformed the sector average over the last five years as its EPS grew by just 4.1% annually
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $294.34 per share, Advanced Energy trades at 33.8x forward P/E. Check out our free in-depth research report to learn more about why AEIS doesn’t pass our bar.

OPENLANE (OPLN)

Trailing 12-Month Free Cash Flow Margin: 17.5%

Facilitating the sale of approximately 1.3 million used vehicles in 2023, OPENLANE (NYSE:OPLN) operates digital marketplaces that connect sellers and buyers of used vehicles across North America and Europe, facilitating wholesale transactions.

Why Does OPLN Fall Short?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 2.4% annually over the last five years
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.6 percentage points
3. 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

OPENLANE’s stock price of $28.82 implies a valuation ratio of 21.5x forward P/E. Read our free research report to see why you should think twice about including OPLN in your portfolio.

High-Quality Stocks for All Market Conditions

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.