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 to avoid and some better opportunities instead.

Trailing 12-Month Free Cash Flow Margin: 19.2%

Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.

Why Does WDC Fall Short?

Sales tumbled by 9.4% annually over the last five years, showing market trends are working against its favor during this cycle

High input costs result in an inferior gross margin of 14.9% that must be offset through higher volumes

Low returns on capital reflect management’s struggle to allocate funds effectively

Western Digital’s stock price of $244.42 implies a valuation ratio of 26.3x forward P/E. To fully understand why you should be careful with WDC, check out our full research report (it’s free).

Trailing 12-Month Free Cash Flow Margin: 10.6%

With a history dating back to 1958 and a portfolio spanning two distinct healthcare segments, Cooper Companies (NASDAQ:COO) develops and manufactures medical devices focused on vision care through contact lenses and women's health including fertility products and services.

Why Are We Hesitant About COO?

6.7% annual revenue growth over the last two years was slower than its healthcare peers

Free cash flow margin dropped by 7.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Underwhelming 5% return on capital reflects management’s difficulties in finding profitable growth opportunities

CooperCompanies is trading at $82.56 per share, or 17.9x forward P/E. Dive into our free research report to see why there are better opportunities than COO.

Trailing 12-Month Free Cash Flow Margin: 1.2%

With a team of experts deployed across 30+ countries to tackle complex business challenges, FTI Consulting (NYSE:FCN) is a global business advisory firm that helps organizations manage change, mitigate risk, and resolve disputes across financial, legal, operational, and regulatory matters.

Why Are We Cautious About FCN?

Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 2.7 percentage points

9.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

At $179.69 per share, FTI Consulting trades at 20.6x forward P/E. If you’re considering FCN for your portfolio, see our FREE research report to learn more.

Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.