Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

Adobe (ADBE)

Trailing 12-Month Free Cash Flow Margin: 42.2%

Originally named after Adobe Creek that ran behind co-founder John Warnock's house, Adobe (NASDAQ: ADBE) develops software products used for digital content creation, document management, and marketing solutions across desktop, mobile, and cloud platforms.

Why Are We Wary of ADBE?

1. ARR growth averaged a weak 13% over the last year, suggesting that competition is pulling some attention away from its software
2. Estimated sales growth of 8.6% for the next 12 months implies demand will slow from its two-year trend
3. Static operating margin over the last year shows it couldn’t become more efficient

Adobe is trading at $258.82 per share, or 4x forward price-to-sales. If you’re considering ADBE for your portfolio, see our FREE research report to learn more.

Simply Good Foods (SMPL)

Trailing 12-Month Free Cash Flow Margin: 10.3%

Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ: SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.

Why Are We Out on SMPL?

1. Lackluster 6% annual revenue growth over the last three years indicates the company is losing ground to competitors
2. Sales are projected to tank by 5.4% over the next 12 months as demand evaporates
3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 24.4 percentage points

At $11.66 per share, Simply Good Foods trades at 6.9x forward P/E. Check out our free in-depth research report to learn more about why SMPL doesn’t pass our bar.

Hexcel (HXL)

Trailing 12-Month Free Cash Flow Margin: 10.6%

Founded shortly after World War II by a group of engineers from UC Berkley, Hexcel (NYSE: HXL) manufactures lightweight composite materials primarily for the aerospace and defense sectors.

Why Does HXL Give Us Pause?

1. Sales trends were unexciting over the last two years as its 3.7% annual growth was below the typical industrials company
2. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 6.4% annually
3. ROIC of 6.9% reflects management’s challenges in identifying attractive investment opportunities

Hexcel’s stock price of $91.07 implies a valuation ratio of 37.3x forward P/E. Dive into our free research report to see why there are better opportunities than HXL.

Stocks We Like More

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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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.