3 Cash-Producing Stocks in the Doghouse

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 that don’t make the cut and some better opportunities instead.

Fortune Brands (FBIN)

Trailing 12-Month Free Cash Flow Margin: 11%

Targeting a wide customer base of residential and commercial customers, Fortune Brands (NYSE:FBIN) makes plumbing, security, and outdoor living products.

Why Do We Avoid FBIN?

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. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.8 percentage points
3. Performance over the past two years shows each sale was less profitable, as its earnings per share fell by 12.9% annually

Fortune Brands is trading at $51.51 per share, or 12x forward P/E. Read our free research report to see why you should think twice about including FBIN in your portfolio.

Hewlett Packard Enterprise (HPE)

Trailing 12-Month Free Cash Flow Margin: 1.3%

Born from the 2015 split of the iconic Silicon Valley pioneer Hewlett-Packard, Hewlett Packard Enterprise (NYSE:HPE) provides edge-to-cloud technology solutions that help businesses capture, analyze, and act upon their data across hybrid IT environments.

Why Should You Sell HPE?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.9% for the last five years
2. Earnings per share fell by 5.9% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.2 percentage points

At $18.38 per share, Hewlett Packard Enterprise trades at 9.5x forward P/E. To fully understand why you should be careful with HPE, check out our full research report (it’s free).

ScanSource (SCSC)

Trailing 12-Month Free Cash Flow Margin: 5.1%

Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ:SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.

Why Should You Dump SCSC?

1. Sales tumbled by 1.5% annually over the last five years, showing market trends are working against its favor during this cycle
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. Underwhelming 8.2% return on capital reflects management’s difficulties in finding profitable growth opportunities

ScanSource’s stock price of $41.89 implies a valuation ratio of 11.3x forward P/E. Check out our free in-depth research report to learn more about why SCSC 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 Growth Stocks for this month. 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 Tecnoglass (+1,754% 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