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.

FOX (FOXA)

Trailing 12-Month Free Cash Flow Margin: 13.9%

Founded in 1915, Fox (NASDAQ: FOXA) is a diversified media company, operating prominent cable news, television broadcasting, and digital media platforms.

Why Do We Pass on FOXA?

1. Annual sales growth of 5.5% over the last five years lagged behind its consumer discretionary peers as its large revenue base made it difficult to generate incremental demand
2. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 4.7 percentage points over the next year
3. Stagnant returns on capital show management has failed to improve the company’s business quality

FOX’s stock price of $57.51 implies a valuation ratio of 11.4x forward P/E. Read our free research report to see why you should think twice about including FOXA in your portfolio.

Comcast (CMCSA)

Trailing 12-Month Free Cash Flow Margin: 15.5%

Formerly known as American Cable Systems, Comcast (NASDAQ: CMCSA) is a multinational telecommunications company offering a wide range of services.

Why Do We Think CMCSA Will Underperform?

1. Number of domestic broadband customers has disappointed over the past two years, indicating weak demand for its offerings
2. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 4.2 percentage points
3. Returns on capital are increasing as management makes relatively better investment decisions

At $30.27 per share, Comcast trades at 8.2x forward P/E. To fully understand why you should be careful with CMCSA, check out our full research report (it’s free).

Packaging Corporation of America (PKG)

Trailing 12-Month Free Cash Flow Margin: 8.1%

Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.

Why Are We Cautious About PKG?

1. Underwhelming unit sales over the past two years suggest it might have to lower prices to accelerate growth
2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 3.7 percentage points
3. Waning returns on capital imply its previous profit engines are losing steam

Packaging Corporation of America is trading at $215.04 per share, or 19.8x forward P/E. Check out our free in-depth research report to learn more about why PKG doesn’t pass our bar.

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