While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.

Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

Chewy (CHWY)

Trailing 12-Month Free Cash Flow Margin: 3.9%

Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE: CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.

Why Are We Wary of CHWY?

1. The company has faced growth challenges as its 8.5% annual revenue increases over the last three years fell short of other consumer internet companies
2. Estimated sales growth of 6.1% for the next 12 months implies demand will slow from its three-year trend
3. High servicing costs result in an inferior gross margin of 29.4% that must be offset through higher volumes

Chewy is trading at $23.80 per share, or 12.1x forward EV/EBITDA. Read our free research report to see why you should think twice about including CHWY in your portfolio.

General Mills (GIS)

Trailing 12-Month Free Cash Flow Margin: 9.5%

Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE: GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.

Why Does GIS Fall Short?

1. Shrinking unit sales over the past two years imply it may need to invest in product improvements to get back on track
2. Forecasted revenue decline of 1.4% for the upcoming 12 months implies demand will fall even further
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 4.6 percentage points

At $44.92 per share, General Mills trades at 13.4x forward P/E. Check out our free in-depth research report to learn more about why GIS doesn’t pass our bar.

Levi's (LEVI)

Trailing 12-Month Free Cash Flow Margin: 4.9%

Credited for inventing the first pair of blue jeans in 1873, Levi's (NYSE: LEVI) is an apparel company renowned for its iconic denim products and classic American style.

Why Do We Think LEVI Will Underperform?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 8% for the last two years
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Levi’s stock price of $21.93 implies a valuation ratio of 14.8x forward P/E. To fully understand why you should be careful with LEVI, check out our full research report (it’s free).

Stocks We Like More

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.