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. That said, here are three cash-producing companies to avoid and some better opportunities instead.
Salesforce (CRM)
Trailing 12-Month Free Cash Flow Margin: 32%
With its cloud-based platform named after its stock ticker symbol CRM (Customer Relationship Management), Salesforce (NYSE:CRM) provides customer relationship management software that helps businesses connect with their customers across sales, service, marketing, and commerce.
Why Are We Cautious About CRM?
- Underwhelming ARR growth of 9.1% over the last year suggests the company faced challenges in acquiring and retaining long-term customers
- Estimated sales growth of 11.8% for the next 12 months is soft and implies weaker demand
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
Salesforce’s stock price of $256.16 implies a valuation ratio of 5.4x forward price-to-sales. Check out our free in-depth research report to learn more about why CRM doesn’t pass our bar.
Driven Brands (DRVN)
Trailing 12-Month Free Cash Flow Margin: 1.8%
With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ:DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.
Why Are We Hesitant About DRVN?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its stores
- Negative free cash flow raises questions about the return timeline for its investments
- Push for growth has led to negative returns on capital, signaling value destruction, and its decreasing returns suggest its historical profit centers are aging
Driven Brands is trading at $14.98 per share, or 10.5x forward P/E. Read our free research report to see why you should think twice about including DRVN in your portfolio.
CTS (CTS)
Trailing 12-Month Free Cash Flow Margin: 15.1%
With roots dating back to 1896 and a global manufacturing footprint, CTS (NYSE:CTS) designs and manufactures sensors, connectivity components, and actuators for aerospace, defense, industrial, medical, and transportation markets.
Why Is CTS Not Exciting?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.3% annually over the last two years
- Earnings per share have contracted by 3.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Waning returns on capital imply its previous profit engines are losing steam
At $44.49 per share, CTS trades at 18.6x forward P/E. If you’re considering CTS for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Check out the high-quality names we’ve flagged in 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 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-small-cap company Exlservice (+354% 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.