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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Zoom (ZM)
Trailing 12-month free cash flow margin: 38.6%
Once the verb that defined remote work during the pandemic ("let's Zoom later"), Zoom (NASDAQ: ZM) provides a cloud-based platform for video meetings, phone calls, team chat, and collaboration tools that helps businesses and individuals connect virtually.
Why Do We Pass on ZM?
- ARR growth averaged a weak 5% over the last year, suggesting that competition is pulling some attention away from its software
- Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 98.5% net revenue retention rate
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.1%
At $92.34 per share, Zoom trades at 5.3x forward price-to-sales. Read our free research report to see why you should think twice about including ZM in your portfolio.
Regeneron (REGN)
Trailing 12-month free cash flow margin: 22.6%
Founded by scientists who wanted to build a company where science could thrive, Regeneron Pharmaceuticals (NASDAQ: REGN) develops and commercializes medicines for serious diseases, with key products treating eye conditions, allergic diseases, cancer, and other disorders.
Why Are We Hesitant About REGN?
- 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 4.5% for the last five years
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 15.1 percentage points
- Diminishing returns on capital suggest its earlier profit pools are drying up
Regeneron is trading at $936.84 per share, or 12.1x forward P/E. Check out our free in-depth research report to learn more about why REGN doesn’t pass our bar.
CONMED (CNMD)
Trailing 12-month free cash flow margin: 9.7%
With over five decades of experience in surgical innovation since its founding in 1970, CONMED (NYSE: CNMD) develops and manufactures medical devices and equipment for surgical procedures, specializing in orthopedic and general surgery products.
Why Does CNMD Give Us Pause?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Revenue base of $1.37 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Underwhelming 5.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
CONMED’s stock price of $53.12 implies a valuation ratio of 10.2x forward P/E. To fully understand why you should be careful with CNMD, check out our full research report (it’s free).
Stocks we like more
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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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
