While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
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.
Tyson Foods (TSN)
Trailing 12-Month Free Cash Flow Margin: 2%
Started as a simple trucking business, Tyson Foods (NYSE: TSN) is one of the world’s largest producers of chicken, beef, and pork.
Why Do We Avoid TSN?
- Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 7.1% that must be offset through higher volumes
- Earnings per share fell by 16.2% annually over the last three years while its revenue was flat, showing each sale was less profitable
Tyson Foods is trading at $64.18 per share, or 15.7x forward P/E. If you’re considering TSN for your portfolio, see our FREE research report to learn more.
A. O. Smith (AOS)
Trailing 12-Month Free Cash Flow Margin: 14.3%
Credited with the invention of the glass-lined water heater, A.O. Smith (NYSE: AOS) manufactures water heating and treatment products for various industries.
Why Is AOS Not Exciting?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Earnings per share lagged its peers over the last two years as they only grew by 2.2% annually
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $64.82 per share, A. O. Smith trades at 16.3x forward P/E. To fully understand why you should be careful with AOS, check out our full research report (it’s free).
Performance Food Group (PFGC)
Trailing 12-Month Free Cash Flow Margin: 1.2%
With a massive network spanning 155 distribution centers and delivering over 250,000 different food products, Performance Food Group (NYSE: PFGC) distributes food and food-related products to over 300,000 restaurants, convenience stores, theaters, and institutions across North America.
Why Do We Think PFGC Will Underperform?
- Unit sales averaged 6% growth over the past two years and imply healthy demand for its products
- Low free cash flow margin of 1.1% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Returns on capital are increasing as management makes relatively better investment decisions
Performance Food Group’s stock price of $91.14 implies a valuation ratio of 17.8x forward P/E. Check out our free in-depth research report to learn more about why PFGC doesn’t pass our bar.
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
