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. Keeping that in mind, here are three cash-producing companies to avoid and some better opportunities instead.

ON24 (ONTF)

Trailing 12-Month Free Cash Flow Margin: 2.3%

Started in 1998 as a platform to broadcast press conferences, ON24’s (NYSE: ONTF) software helps organizations organize online webinars and other virtual events and convert prospects into customers.

Why Do We Pass on ONTF?

1. Offerings couldn’t generate interest over the last year as its billings have averaged 3.3% declines
2. Sales are projected to tank by 6% over the next 12 months as its demand continues evaporating
3. Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low

At $5.02 per share, ON24 trades at 1.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ONTF.

Wynn Resorts (WYNN)

Trailing 12-Month Free Cash Flow Margin: 11%

Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ: WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.

Why Is WYNN Not Exciting?

1. 3.3% annual revenue growth over the last five years was slower than its consumer discretionary peers
2. Underwhelming 1.9% return on capital reflects management’s difficulties in finding profitable growth opportunities
3. High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Wynn Resorts’s stock price of $107.50 implies a valuation ratio of 22.3x forward P/E. To fully understand why you should be careful with WYNN, check out our full research report (it’s free).

NVR (NVR)

Trailing 12-Month Free Cash Flow Margin: 12.2%

Known for its unique land acquisition strategy, NVR (NYSE: NVR) is a respected homebuilder and mortgage company in the United States.

Why Does NVR Give Us Pause?

1. Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 1.3% for the past two years was weak
2. Sales are projected to tank by 6.9% over the next 12 months as demand evaporates
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

NVR is trading at $7,600 per share, or 17.8x forward P/E. Check out our free in-depth research report to learn more about why NVR doesn’t pass our bar.

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