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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.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

Lowe's (LOW)

Trailing 12-Month Free Cash Flow Margin: 9.2%

Founded in North Carolina as Lowe's North Wilkesboro Hardware, the company is a home improvement retailer that sells everything from paint to tools to building materials.

Why Does LOW Worry Us?

1. Store closures and disappointing same-store sales suggest demand is sluggish and it’s rightsizing its operations

2. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience

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

At $225.34 per share, Lowe's trades at 18.1x forward P/E. Check out our free in-depth research report to learn more about why LOW doesn’t pass our bar.

Boot Barn (BOOT)

Trailing 12-Month Free Cash Flow Margin: 2.7%

With a strong store presence in Texas, California, Florida, and Oklahoma, Boot Barn (NYSE:BOOT) is a western-inspired apparel and footwear retailer.

Why Are We Wary of BOOT?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations

2. Smaller revenue base of $1.85 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy

3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 3.7 percentage points

Boot Barn is trading at $118.84 per share, or 18.1x forward P/E. Read our free research report to see why you should think twice about including BOOT in your portfolio, it’s free.

CONMED (CNMD)

Trailing 12-Month Free Cash Flow Margin: 12.5%

With over five decades of experience in surgical innovation since its founding in 1970, CONMED (NYSE:CNMD) develops and manufactures medical devices and equipment for surgical procedures, specializing in orthopedic and general surgery products.

Why Do We Think Twice About CNMD?

1. Muted 6.7% annual revenue growth over the last five years shows its demand lagged behind its healthcare peers

2. Modest revenue base of $1.32 billion gives it less fixed cost leverage and fewer distribution channels than larger companies

3. Underwhelming 5% return on capital reflects management’s difficulties in finding profitable growth opportunities