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.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are three cash-producing companies to avoid and some better opportunities instead.

Foot Locker (FL)

Trailing 12-Month Free Cash Flow Margin: 1.3%

Known for store associates whose uniforms resemble those of referees, Foot Locker (NYSE:FL) is a specialty retailer that sells athletic footwear, clothing, and accessories.

Why Are We Out on FL?

1. Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation

2. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand

3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Foot Locker is trading at $11.80 per share, or 6.8x forward price-to-earnings. Read our free research report to see why you should think twice about including FL in your portfolio, it’s free .

Zillow (ZG)

Trailing 12-Month Free Cash Flow Margin: 12.7%

Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ:ZG) is the leading U.S. online real estate marketplace.

Why Do We Think Twice About ZG?

1. Products and services have few die-hard fans as sales have declined by 4% annually over the last five years

2. Suboptimal cost structure is highlighted by its history of operating losses

3. Negative returns on capital show management lost money while trying to expand the business

Zillow’s stock price of $64.87 implies a valuation ratio of 33.7x forward price-to-earnings. If you’re considering ZG for your portfolio, see our FREE research report to learn more .

Organon (OGN)

Trailing 12-Month Free Cash Flow Margin: 11.9%

Spun off from Merck in 2021 to create a company dedicated to addressing unmet needs in women's health, Organon (NYSE:OGN) is a global healthcare company focused on improving women's health through prescription therapies, medical devices, biosimilars, and established medicines.

Why Should You Sell OGN?

1. Annual sales declines of 3.6% for the past five years show its products and services struggled to connect with the market during this cycle

2. Adjusted operating margin declined by 17.3 percentage points over the last five years as its sales cratered

3. Earnings per share have contracted by 19.8% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance