3 Cash-Producing Stocks with Bad Fundamentals

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

Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are three cash-producing companies to steer clear of and a few better alternatives.

Edgewell Personal Care (EPC)

Trailing 12-Month Free Cash Flow Margin: 1.4%

Boasting brands such as Banana Boat, Schick, and Skintimate, Edgewell Personal Care (NYSE:EPC) sells personal care products in the skin and sun care, shave, and feminine care categories.

Why Do We Think EPC Will Underperform?

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. Free cash flow margin dropped by 8.3 percentage points over the last year, implying the company became more capital intensive as competition picked up
3. ROIC of 6.2% reflects management’s challenges in identifying attractive investment opportunities

At $24.84 per share, Edgewell Personal Care trades at 7.5x forward P/E. If you’re considering EPC for your portfolio, see our FREE research report to learn more.

Generac (GNRC)

Trailing 12-Month Free Cash Flow Margin: 12.6%

With its name deriving from a combination of “generating” and “AC”, Generac (NYSE:GNRC) offers generators and other power products for residential, industrial, and commercial use.

Why Is GNRC Risky?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. Free cash flow margin shrank by 7.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Eroding returns on capital suggest its historical profit centers are aging

Generac is trading at $127.71 per share, or 15.8x forward P/E. Read our free research report to see why you should think twice about including GNRC in your portfolio.

Dentsply Sirona (XRAY)

Trailing 12-Month Free Cash Flow Margin: 7.5%

With roots dating back to 1877 when it introduced the first dental electric drill, Dentsply Sirona (NASDAQ:XRAY) manufactures and sells professional dental equipment, technologies, and consumable products used by dentists and specialists worldwide.

Why Do We Steer Clear of XRAY?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 7% annually, worse than its revenue
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Dentsply Sirona’s stock price of $16.18 implies a valuation ratio of 8.5x forward P/E. Dive into our free research report to see why there are better opportunities than XRAY.

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.