3 Cash-Producing Stocks Facing Headwinds

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.

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 avoid and some better opportunities instead.

FormFactor (FORM)

Trailing 12-Month Free Cash Flow Margin: 8.9%

With customers across the foundry and fabless markets, FormFactor (NASDAQ:FORM) is a US-based provider of test and measurement technologies for semiconductors.

Why Do We Think FORM Will Underperform?

1. 4.4% annual revenue growth over the last five years was slower than its semiconductor peers
2. Estimated sales growth of 2.4% for the next 12 months is soft and implies weaker demand
3. Efficiency has decreased over the last five years as its operating margin fell by 6.1 percentage points

FormFactor is trading at $29.75 per share, or 20.2x forward P/E. To fully understand why you should be careful with FORM, check out our full research report (it’s free).

Service International (SCI)

Trailing 12-Month Free Cash Flow Margin: 15.4%

Founded in 1962, Service International (NYSE: SCI) is a leading provider of death care products and services in North America.

Why Does SCI Worry Us?

1. Performance surrounding its funeral services performed has lagged its peers
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.6%
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $75.18 per share, Service International trades at 19.1x forward P/E. If you’re considering SCI for your portfolio, see our FREE research report to learn more.

United Parcel Service (UPS)

Trailing 12-Month Free Cash Flow Margin: 5.9%

Trademarking its recognizable UPS Brown color, UPS (NYSE:UPS) offers package delivery, supply chain management, and freight forwarding services.

Why Should You Dump UPS?

1. Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth
2. Sales were less profitable over the last two years as its earnings per share fell by 19.8% annually, worse than its revenue declines
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

United Parcel Service’s stock price of $95.60 implies a valuation ratio of 12.5x forward P/E. Read our free research report to see why you should think twice about including UPS in your portfolio.

Stocks That Overcame Trump’s 2018 Tariffs

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.