A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Asana (ASAN)
Trailing 12-Month Free Cash Flow Margin: 5.2%
Born from the founders' frustration with the inefficiencies of email-based collaboration at Facebook, Asana (NYSE: ASAN) provides a work management platform that helps organizations track projects, set goals, and manage workflows in a centralized digital workspace.
Why Are We Out on ASAN?
- Offerings struggled to generate meaningful interest as its average billings growth of 9.6% over the last year did not impress
- Net revenue retention rate of 95.7% shows it has a tough time retaining customers
- Drawn-out sales process reflects its software’s integration hurdles with enterprise clients, restraining customer growth potential
Asana is trading at $13.20 per share, or 3.8x forward price-to-sales. To fully understand why you should be careful with ASAN, check out our full research report (it’s free for active Edge members).
Clean Harbors (CLH)
Trailing 12-Month Free Cash Flow Margin: 8.3%
Established in 1980, Clean Harbors (NYSE: CLH) provides environmental and industrial services like hazardous and non-hazardous waste disposal and emergency spill cleanups.
Why Does CLH Fall Short?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Estimated sales growth of 3.5% for the next 12 months implies demand will slow from its two-year trend
- Earnings per share lagged its peers over the last two years as they only grew by 5% annually
At $205.12 per share, Clean Harbors trades at 26.1x forward P/E. Dive into our free research report to see why there are better opportunities than CLH.
Knowles (KN)
Trailing 12-Month Free Cash Flow Margin: 19.1%
With roots dating back to 1946 and a focus on components that must perform flawlessly in critical situations, Knowles (NYSE: KN) designs and manufactures specialized electronic components like high-performance capacitors, microphones, and speakers for medical technology, defense, and industrial applications.
Why Is KN Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.7% annually over the last five years
- Smaller revenue base of $573.5 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Underwhelming 8.3% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam
Knowles’s stock price of $22.52 implies a valuation ratio of 18.7x forward P/E. If you’re considering KN for your portfolio, see our FREE research report to learn more.
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