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A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

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.

Tenable (TENB)

Trailing 12-Month Free Cash Flow Margin: 26%

Founded in 2002 by three cybersecurity veterans, Tenable (NASDAQ:TENB) provides software as a service that helps companies understand where they are exposed to cyber security risk and how to reduce it.

Why Do We Think Twice About TENB?

1. Annual revenue growth of 16.9% over the last three years was below our standards for the software sector

2. Estimated sales growth of 7.5% for the next 12 months implies demand will slow from its three-year trend

3. Persistent operating losses suggest the business manages its expenses poorly

Tenable’s stock price of $31.83 implies a valuation ratio of 3.8x forward price-to-sales. Check out our free in-depth research report to learn more about why TENB doesn’t pass our bar.

General Motors (GM)

Trailing 12-Month Free Cash Flow Margin: 7%

Founded in 1908 by William C. Durant, General Motors (NYSE:GM) offers a range of vehicles and automobiles through brands such as Chevrolet, Buick, GMC, and Cadillac.

Why Is GM Not Exciting?

1. Disappointing unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases

2. Sales are projected to tank by 6.2% over the next 12 months as demand evaporates

3. Gross margin of 12.5% is below its competitors, leaving less money to invest in areas like marketing and R&D

At $45.50 per share, General Motors trades at 4.2x forward P/E. Read our free research report to see why you should think twice about including GM in your portfolio, it’s free.

CooperCompanies (COO)

Trailing 12-Month Free Cash Flow Margin: 9.8%

With a history dating back to 1958 and a portfolio spanning two distinct healthcare segments, Cooper Companies (NASDAQ:COO) develops and manufactures medical devices focused on vision care through contact lenses and women's health including fertility products and services.

Why Does COO Fall Short?

1. Performance over the past five years was negatively impacted by new share issuances as its earnings per share grew slower than its revenue

2. ROIC of 4.9% reflects management’s challenges in identifying attractive investment opportunities

CooperCompanies is trading at $80.01 per share, or 19.9x forward P/E. Dive into our free research report to see why there are better opportunities than COO.