Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, 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: 1.3%

Founded in 1969 as a shoe importer and distributor, Designer Brands (NYSE:DBI) is an American discount retailer focused on footwear and accessories.

Why Should You Sell DBI?

Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience

Underwhelming 2.7% return on capital reflects management’s difficulties in finding profitable growth opportunities

High net-debt-to-EBITDA ratio of 11× could force the company to raise capital at unfavorable terms if market conditions deteriorate

At $3.43 per share, Designer Brands trades at 13.8x forward P/E. Read our free research report to see why you should think twice about including DBI in your portfolio, it’s free.

Trailing 12-Month Free Cash Flow Margin: 14.8%

With a unique business model combining end-of-life care and household services, Chemed (NYSE:CHE) operates two distinct businesses: VITAS, which provides hospice care for terminally ill patients, and Roto-Rooter, which offers plumbing and water restoration services.

Why Are We Wary of CHE?

Annual revenue growth of 4.4% over the last five years was below our standards for the healthcare sector

Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 2.7 percentage points

Eroding returns on capital suggest its historical profit centers are aging

Chemed is trading at $443.87 per share, or 17.7x forward P/E. If you’re considering CHE for your portfolio, see our FREE research report to learn more.

Trailing 12-Month Free Cash Flow Margin: 1.5%

Started in 2014 by the team of engineers at LinkedIn who originally built it as an internal tool, Confluent (NASDAQ:CFLT) provides infrastructure software for organizations that makes it easy and fast to collect and move large amounts of data between different systems.

Why Do We Like CFLT?

Billings have averaged 32.6% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time

Projected revenue growth of 16.3% for the next 12 months suggests its momentum from the last three years will persist

Free cash flow margin is on track to jump by 5.6 percentage points next year, meaning the company will have more resources to pursue growth initiatives, repurchase shares, or pay dividends

Confluent’s stock price of $17.85 implies a valuation ratio of 4.9x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

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