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 to avoid and some better opportunities instead.

Walmart (WMT)

Trailing 12-Month Free Cash Flow Margin: 2.1%

Known for its large-format Supercenters, Walmart (NASDAQ: WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.

Why Are We Hesitant About WMT?

1. Annual sales growth of 5.3% over the last three years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
2. Gross margin of 24.9% is an output of its commoditized inventory
3. Poor expense management has led to an operating margin of 4.3% that is below the industry average

Walmart’s stock price of $124.26 implies a valuation ratio of 42.4x forward P/E. Dive into our free research report to see why there are better opportunities than WMT.

Kyndryl (KD)

Trailing 12-Month Free Cash Flow Margin: 2.5%

Born from IBM's managed infrastructure services business in a 2021 spinoff, Kyndryl (NYSE: KD) is the world's largest IT infrastructure services provider that designs, builds, and manages technology environments for enterprise customers.

Why Are We Wary of KD?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.8% annually over the last five years
2. Poor free cash flow margin of -0.2% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Negative returns on capital show that some of its growth strategies have backfired

Kyndryl is trading at $12.95 per share, or 6x forward P/E. Check out our free in-depth research report to learn more about why KD doesn’t pass our bar.

Western Union (WU)

Trailing 12-Month Free Cash Flow Margin: 9.8%

With a history dating back to 1851 when it began as a telegraph company, Western Union (NYSE: WU) is a global money transfer service that enables consumers and businesses to send funds across borders and currencies, typically within minutes.

Why Do We Pass on WU?

1. Sales tumbled by 2.9% annually over the last five years, showing market trends are working against its favor during this cycle
2. Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term

At $8.78 per share, Western Union trades at 4.9x forward P/E. Read our free research report to see why you should think twice about including WU in your portfolio.

Stocks We Like More

ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.

Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.

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 Kadant (+351% five-year return). Find your next big winner with StockStory today.