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 that don’t make the cut and some better opportunities instead.
Gilead Sciences (GILD)
Trailing 12-Month Free Cash Flow Margin: 31.5%
From its groundbreaking work in developing the first single-tablet regimens for HIV treatment, Gilead Sciences (NASDAQ: GILD) develops and markets innovative medicines for life-threatening diseases including HIV, viral hepatitis, COVID-19, and cancer.
Why Does GILD Worry Us?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 2.5% over the last two years was below our standards for the healthcare sector
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 7.5 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Gilead Sciences is trading at $139.31 per share, or 16.5x forward P/E. Read our free research report to see why you should think twice about including GILD in your portfolio.
Exponent (EXPO)
Trailing 12-Month Free Cash Flow Margin: 23.1%
With a team of over 800 consultants holding advanced degrees in 90+ technical disciplines, Exponent (NASDAQ: EXPO) is a science and engineering consulting firm that investigates complex problems and provides expert analysis for clients across various industries.
Why Are We Wary of EXPO?
- Annual revenue growth of 3.5% over the last two years was below our standards for the business services sector
- Annual earnings per share growth of 1.8% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- Waning returns on capital imply its previous profit engines are losing steam
Exponent’s stock price of $71.49 implies a valuation ratio of 33.6x forward P/E. Check out our free in-depth research report to learn more about why EXPO doesn’t pass our bar.
Hewlett Packard Enterprise (HPE)
Trailing 12-Month Free Cash Flow Margin: 2.9%
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 Does HPE Fall Short?
- 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 4.9% for the last five years
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 5.5% annually
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 10.5 percentage points
At $21.90 per share, Hewlett Packard Enterprise trades at 9.2x forward P/E. Dive into our free research report to see why there are better opportunities than HPE.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
