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. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

Fresh Del Monte Produce (FDP)

Trailing 12-Month Free Cash Flow Margin: 3.8%

Translating to "of the mountain" in Spanish, Fresh Del Monte (NYSE: FDP) is a leader in providing high-quality, sustainably grown fresh fruits and vegetables.

Why Do We Think FDP Will Underperform?

1. Flat sales over the last three years suggest it must innovate and find new ways to grow
2. Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 8.2%
3. Underwhelming 5.3% return on capital reflects management’s difficulties in finding profitable growth opportunities

Fresh Del Monte Produce is trading at $33.53 per share, or 8.3x forward EV-to-EBITDA. To fully understand why you should be careful with FDP, check out our full research report (it’s free).

PENN Entertainment (PENN)

Trailing 12-Month Free Cash Flow Margin: 1.7%

Established in 1982, PENN Entertainment (NASDAQ: PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.

Why Is PENN Risky?

1. Muted 1% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 46.8% annually
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $19.20 per share, PENN Entertainment trades at 1.9x forward EV-to-EBITDA. If you’re considering PENN for your portfolio, see our FREE research report to learn more.

AECOM (ACM)

Trailing 12-Month Free Cash Flow Margin: 5.2%

Founded in 1990 when a group of engineers from five companies decided to merge, AECOM (NYSE: ACM) provides various infrastructure consulting services.

Why Are We Hesitant About ACM?

1. Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 1.6% declines over the past two years
2. Gross margin of 6.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
3. Subpar operating margin of 4.3% constrains its ability to invest in process improvements or effectively respond to new competitive threats

AECOM’s stock price of $115.64 implies a valuation ratio of 22.5x forward P/E. Dive into our free research report to see why there are better opportunities than ACM.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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