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.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.

Trailing 12-Month Free Cash Flow Margin: 2%

Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ:ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.

Why Do We Avoid ARCB?

Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy

Sales were less profitable over the last two years as its earnings per share fell by 23.1% annually, worse than its revenue declines

Diminishing returns on capital suggest its earlier profit pools are drying up

ArcBest’s stock price of $86.28 implies a valuation ratio of 24.2x forward P/E. Read our free research report to see why you should think twice about including ARCB in your portfolio, it’s free.

Trailing 12-Month Free Cash Flow Margin: 14.6%

With expertise dating back to 1963 in specialized materials and precision manufacturing, UFP Technologies (NASDAQ:UFPT) designs and manufactures custom solutions for medical devices, sterile packaging, and other highly engineered products for healthcare and industrial applications.

Why Do We Think Twice About UFPT?

Smaller revenue base of $598 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy

Estimated sales growth of 4.6% for the next 12 months implies demand will slow from its two-year trend

At $273.50 per share, UFP Technologies trades at 25.8x forward P/E. Dive into our free research report to see why there are better opportunities than UFPT.

Trailing 12-Month Free Cash Flow Margin: 13.6%

Founded in 1927 and operating in approximately 130 countries through direct operations and correspondent networks, Arthur J. Gallagher (NYSE:AJG) provides insurance brokerage, reinsurance, consulting, and third-party claims settlement services to businesses and individuals worldwide.

Why Is AJG a Good Business?

Annual revenue growth of 16% over the past two years was outstanding, reflecting market share gains this cycle

Earnings per share grew by 18.7% annually over the last five years, massively outpacing its peers

Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends

Arthur J. Gallagher is trading at $256.94 per share, or 20.1x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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