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. Keeping that in mind, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

NXP Semiconductors (NXPI)

Trailing 12-Month Free Cash Flow Margin: 21.5%

Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.

Why Does NXPI Worry Us?

1. Annual sales declines of 2.5% for the past two years show its products and services struggled to connect with the market during this cycle
2. Anticipated sales growth of 15.9% for the next year implies demand will be shaky

At $271.10 per share, NXP Semiconductors trades at 17x forward P/E. If you’re considering NXPI for your portfolio, see our FREE research report to learn more.

PACCAR (PCAR)

Trailing 12-Month Free Cash Flow Margin: 12.2%

Founded more than a century ago, PACCAR (NASDAQ: PCAR) designs and manufactures commercial trucks of various weights and sizes for the commercial trucking industry.

Why Are We Wary of PCAR?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 11.4% annually over the last two years
2. Earnings per share have dipped by 30.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

PACCAR is trading at $125.10 per share, or 20.7x forward P/E. To fully understand why you should be careful with PCAR, check out our full research report (it’s free).

NOV (NOV)

Trailing 12-Month Free Cash Flow Margin: 8.4%

With roots stretching back to 1862 when it began making equipment for early oil fields, NOV (NYSE: NOV) manufactures drilling rigs, drill bits, pumps, and other equipment used to drill oil and gas wells.

Why Should You Dump NOV?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 3.3% annually over the last ten years
2. Gross margin of 20.3% is below its competitors, leaving less money to invest in exploration and production
3. Low free cash flow margin of 3.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

NOV’s stock price of $20.23 implies a valuation ratio of 19.6x forward P/E. Check out our free in-depth research report to learn more about why NOV doesn’t pass our bar.

Stocks We Like More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.