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.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.

Two Stocks to Sell:

B&G Foods (BGS)

Trailing 12-Month Free Cash Flow Margin: 5.4%

Started as a small grocery store in New York City, B&G Foods (NYSE:BGS) is an American packaged foods company with a diverse portfolio of more than 50 brands.

Why Are We Out on BGS?

1. Annual sales declines of 2% for the past three years show its products struggled to connect with the market

2. Sales were less profitable over the last three years as its earnings per share fell by 27.9% annually, worse than its revenue declines

3. High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens

B&G Foods’s stock price of $6.74 implies a valuation ratio of 10x forward P/E. If you’re considering BGS for your portfolio, see our FREE research report to learn more .

Maximus (MMS)

Trailing 12-Month Free Cash Flow Margin: 5.2%

With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE:MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.

Why Are We Cautious About MMS?

1. Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend

2. ROIC of 12.3% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up

3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $66.33 per share, Maximus trades at 10.7x forward P/E. To fully understand why you should be careful with MMS, check out our full research report (it’s free) .

One Stock to Watch:

ACV Auctions (ACVA)

Trailing 12-Month Free Cash Flow Margin: 4.9%

Founded in 2014, ACV Auctions (NASDAQ:ACVA) is an online auction marketplace for car dealers and wholesalers to buy and sell used cars.

Why Does ACVA Catch Our Eye?

1. Marketplace Units have grown by 17% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features

2. EBITDA margin expanded by 16.7 percentage points over the last few years as it scaled and became more efficient

3. Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 28.1% annually