3 Cash-Producing Stocks in the Doghouse

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 to avoid and some better opportunities instead.

Enpro (NPO)

Trailing 12-Month Free Cash Flow Margin: 13.8%

Holding a Guinness World Record for creating the world's largest gasket, Enpro (NYSE:NPO) designs, manufactures, and sells products used for machinery in various industries.

Why Does NPO Worry Us?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.1% annually over the last five years
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. ROIC of 6.7% reflects management’s challenges in identifying attractive investment opportunities

At $192.50 per share, Enpro trades at 24.9x forward P/E. If you’re considering NPO for your portfolio, see our FREE research report to learn more.

Premier (PINC)

Trailing 12-Month Free Cash Flow Margin: 29.6%

Operating one of the largest healthcare group purchasing organizations in the United States with over 4,350 hospital members, Premier (NASDAQ:PINC) is a technology-driven healthcare improvement company that helps hospitals, health systems, and other providers reduce costs and improve clinical outcomes.

Why Do We Steer Clear of PINC?

1. Sales tumbled by 9.3% annually over the last two years, showing market trends are working against its favor during this cycle
2. Forecasted revenue decline of 10.6% for the upcoming 12 months implies demand will fall even further
3. Earnings per share have dipped by 9.5% annually over the past five years, which is concerning because stock prices follow EPS over the long term

Premier’s stock price of $22 implies a valuation ratio of 16.7x forward P/E. Read our free research report to see why you should think twice about including PINC in your portfolio.

Xerox (XRX)

Trailing 12-Month Free Cash Flow Margin: 7.2%

Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ:XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.

Why Do We Think XRX Will Underperform?

1. Annual sales declines of 6.7% for the past five years show its products and services struggled to connect with the market during this cycle
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Xerox is trading at $5.37 per share, or 5.4x forward P/E. Check out our free in-depth research report to learn more about why XRX doesn’t pass our bar.

Stocks We Like More

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 Strong Momentum Stocks for this week. 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-micro-cap company Kadant (+351% 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.