A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.
Figs (FIGS)
Trailing 12-Month Free Cash Flow Margin: 11.5%
Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE:FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.
Why Does FIGS Give Us Pause?
- Demand for its offerings was relatively low as its number of active customers has underwhelmed
- Projected sales decline of 2% for the next 12 months points to a tough demand environment ahead
- Push for growth has led to negative returns on capital, signaling value destruction
Figs is trading at $4.09 per share, or 47.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than FIGS.
Acushnet (GOLF)
Trailing 12-Month Free Cash Flow Margin: 6.9%
Producer of the acclaimed Titleist Pro V1 golf ball, Acushnet (NYSE:GOLF) is a design and manufacturing company specializing in performance-driven golf products.
Why Are We Cautious About GOLF?
- 4% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its two-year trend
- Poor free cash flow margin of 9.6% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $63 per share, Acushnet trades at 16.8x forward price-to-earnings. If you’re considering GOLF for your portfolio, see our FREE research report to learn more.
The Real Brokerage (REAX)
Trailing 12-Month Free Cash Flow Margin: 3.8%
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ:REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.
Why Do We Think Twice About REAX?
- Persistent operating losses suggest the business manages its expenses poorly
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 3.8% annually
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
The Real Brokerage’s stock price of $4.88 implies a valuation ratio of 19.2x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why REAX doesn’t pass our bar.
Stocks We Like More
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