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.

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.

Wayfair (W)

Trailing 12-Month Free Cash Flow Margin: 1.5%

Founded in 2002 by Niraj Shah, Wayfair (NYSE: W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.

Why Do We Steer Clear of W?

1. Intense competition is diverting traffic from its platform as its active customers fell by 1.7% annually
2. Monetization and engagement metrics haven’t budged over the last two years, suggesting it may need to increase the efficacy of its platform
3. Gross margin of 30.3% reflects its high servicing costs

At $87.32 per share, Wayfair trades at 21.4x forward EV/EBITDA. If you’re considering W for your portfolio, see our FREE research report to learn more.

Regeneron (REGN)

Trailing 12-Month Free Cash Flow Margin: 27.1%

Founded by scientists who wanted to build a company where science could thrive, Regeneron Pharmaceuticals (NASDAQ: REGN) develops and commercializes medicines for serious diseases, with key products treating eye conditions, allergic diseases, cancer, and other disorders.

Why Does REGN Worry Us?

1. Annual sales growth of 5.9% over the last two years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
2. Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 21.4 percentage points
3. Eroding returns on capital suggest its historical profit centers are aging

Regeneron’s stock price of $559.29 implies a valuation ratio of 15.4x forward P/E. To fully understand why you should be careful with REGN, check out our full research report (it’s free).

Corcept (CORT)

Trailing 12-Month Free Cash Flow Margin: 25.2%

Focusing on the powerful stress hormone that affects everything from metabolism to immune function, Corcept Therapeutics (NASDAQ: CORT) develops and markets medications that modulate cortisol to treat endocrine disorders, cancer, and neurological diseases.

Why Is CORT Not Exciting?

1. Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 16.9 percentage points
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.8% annually
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Corcept is trading at $71.78 per share, or 41x forward P/E. Check out our free in-depth research report to learn more about why CORT doesn’t pass our bar.

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