A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are three cash-producing companies to avoid and some better opportunities instead.

Huntington Ingalls (HII)

Trailing 12-Month Free Cash Flow Margin: 6.4%

Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE: HII) develops marine vessels and their mission systems and maintenance services.

Why Are We Out on HII?

1. The company has faced growth challenges as its 4.4% annual revenue increases over the last two years fell short of other industrials companies
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.4%
3. Earnings per share have dipped by 2.1% annually over the past five years, which is concerning because stock prices follow EPS over the long term

At $368.50 per share, Huntington Ingalls trades at 22x forward P/E. If you’re considering HII for your portfolio, see our FREE research report to learn more.

Pitney Bowes (PBI)

Trailing 12-Month Free Cash Flow Margin: 18.5%

With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE: PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.

Why Are We Cautious About PBI?

1. Sales tumbled by 11.8% annually over the last five years, showing market trends are working against its favor during this cycle
2. Sales are projected to tank by 3.9% over the next 12 months as its demand continues evaporating

Pitney Bowes is trading at $10.88 per share, or 7.4x forward P/E. Dive into our free research report to see why there are better opportunities than PBI.

Viking (VIK)

Trailing 12-Month Free Cash Flow Margin: 23.6%

From a single river cruise offering to a fleet of 96 vessels across multiple continents, Viking (NYSE: VIK) operates a fleet of small luxury cruise ships offering river, ocean, and expedition voyages focused on cultural enrichment and destination immersion.

Why Do We Avoid VIK?

1. Muted 17.5% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
2. Poor expense management has led to an operating margin of 21.8% that is below the industry average
3. Poor free cash flow margin of 22.8% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

Viking’s stock price of $68.00 implies a valuation ratio of 20.7x forward P/E. If you’re considering VIK for your portfolio, see our FREE research report to learn more.

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