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.
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 steer clear of and a few better alternatives.
Lattice Semiconductor (LSCC)
Trailing 12-Month Free Cash Flow Margin: 25.3%
A global leader in its category, Lattice Semiconductor (NASDAQ: LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.
Why Does LSCC Fall Short?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 15.7% annually over the last two years
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 17.4 percentage points
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.3 percentage points
Lattice Semiconductor is trading at $106.82 per share, or 68.2x forward P/E. Read our free research report to see why you should think twice about including LSCC in your portfolio.
Zumiez (ZUMZ)
Trailing 12-Month Free Cash Flow Margin: 4.6%
With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ: ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.
Why Should You Dump ZUMZ?
- Recent store closures reflect a shift toward streamlining existing locations to maximize efficiency
- Modest revenue base of $929.1 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
At $24.24 per share, Zumiez trades at 26.2x forward P/E. If you’re considering ZUMZ for your portfolio, see our FREE research report to learn more.
Cal-Maine (CALM)
Trailing 12-Month Free Cash Flow Margin: 20.8%
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.
Why Are We Cautious About CALM?
- Lackluster 4.3% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Estimated sales decline of 20% for the next 12 months implies a challenging demand environment
- Efficiency has decreased over the last year as its operating margin fell by 8.1 percentage points
Cal-Maine’s stock price of $76.03 implies a valuation ratio of 23x forward P/E. To fully understand why you should be careful with CALM, check out our full research report (it’s free).
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
