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

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 steer clear of and a few better alternatives.

Wendy's (WEN)

Trailing 12-Month Free Cash Flow Margin: 10.8%

Founded by Dave Thomas in 1969, Wendy’s (NASDAQ: WEN) is a renowned fast-food chain known for its fresh, never-frozen beef burgers, flavorful menu options, and commitment to quality.

Why Are We Cautious About WEN?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Wendy’s stock price of $8.55 implies a valuation ratio of 10.2x forward P/E. Read our free research report to see why you should think twice about including WEN in your portfolio.

CDW (CDW)

Trailing 12-Month Free Cash Flow Margin: 4.4%

Serving as a crucial bridge between technology manufacturers and end users since 1984, CDW (NASDAQ: CDW) is a multi-brand provider of information technology solutions that helps businesses and public sector organizations select, implement, and manage hardware, software, and IT services.

Why Do We Think Twice About CDW?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2%
3. Earnings per share were flat over the last two years and fell short of the peer group average

At $132.40 per share, CDW trades at 13x forward P/E. To fully understand why you should be careful with CDW, check out our full research report (it’s free).

DXC (DXC)

Trailing 12-Month Free Cash Flow Margin: 7.3%

Born from the 2017 merger of Computer Sciences Corporation and HP Enterprise's services business, DXC Technology (NYSE: DXC) is a global IT services company that helps businesses transform their technology infrastructure, applications, and operations.

Why Is DXC Risky?

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. Earnings per share were flat over the last five years and fell short of the peer group average
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up

DXC is trading at $14.89 per share, or 5x forward P/E. Dive into our free research report to see why there are better opportunities than DXC.

Stocks We Like More

Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.