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.

Energizer (ENR)

Trailing 12-Month Free Cash Flow Margin: 6.1%

Masterminds behind the viral Energizer Bunny mascot, Energizer (NYSE: ENR) is one of the world's largest manufacturers of batteries.

Why Does ENR Worry Us?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Estimated sales growth of 1.3% for the next 12 months is soft and implies weaker demand
3. Free cash flow margin shrank by 4.6 percentage points over the last year, suggesting the company is consuming more capital to stay competitive

Energizer’s stock price of $21.20 implies a valuation ratio of 5.8x forward P/E. Check out our free in-depth research report to learn more about why ENR doesn’t pass our bar.

Comcast (CMCSA)

Trailing 12-Month Free Cash Flow Margin: 10.9%

Formerly known as American Cable Systems, Comcast (NASDAQ: CMCSA) is a multinational telecommunications company offering a wide range of services.

Why Are We Out on CMCSA?

1. Number of domestic broadband customers has disappointed over the past two years, indicating weak demand for its offerings
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Comcast is trading at $36.38 per share, or 8.3x forward P/E. If you’re considering CMCSA for your portfolio, see our FREE research report to learn more.

Malibu Boats (MBUU)

Trailing 12-Month Free Cash Flow Margin: 2.5%

Founded in California in 1982, Malibu Boats (NASDAQ: MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.

Why Is MBUU Risky?

1. Sluggish trends in its boats sold suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Sales over the last five years were less profitable as its earnings per share fell by 17.4% annually while its revenue was flat
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $32.66 per share, Malibu Boats trades at 11.3x forward P/E. To fully understand why you should be careful with MBUU, check out our full research report (it’s free).

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