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. That said, here are three cash-producing companies to steer clear of and a few better alternatives.
Skyworks Solutions (SWKS)
Trailing 12-Month Free Cash Flow Margin: 10.8%
Result of a merger of Alpha Industries and the wireless communications division of Conexant, Skyworks Solutions (NASDAQ: SWKS) is a designer and manufacturer of chips used in smartphones, autos, and industrial applications to amplify, filter, and process wireless signals.
Why Do We Think SWKS Will Underperform?
- Sales tumbled by 4.2% annually over the last two years, showing market trends are working against it during this cycle
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
Skyworks Solutions’s stock price of $87.99 implies a valuation ratio of 18.9x forward P/E. Check out our free in-depth research report to learn more about why SWKS doesn’t pass our bar.
Agilysys (AGYS)
Trailing 12-Month Free Cash Flow Margin: 24.4%
With a tech stack that powers everything from check-in to checkout at some of the world's top hospitality venues, Agilysys (NASDAQ: AGYS) develops and provides cloud-based and on-premise software solutions for hotels, resorts, casinos, and restaurants to manage operations and enhance guest experiences.
Why Does AGYS Give Us Pause?
- Gross margin of 63.1% reflects its relatively high servicing costs
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 4.8 percentage points
At $97.10 per share, Agilysys trades at 7.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than AGYS.
Performance Food Group (PFGC)
Trailing 12-Month Free Cash Flow Margin: 1.5%
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 Steer Clear of PFGC?
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.3% for the last two years
Performance Food Group is trading at $92.01 per share, or 16.3x forward P/E. If you’re considering PFGC for your portfolio, see our FREE research report to learn more.
Stocks We Like More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
