3 Cash-Producing Stocks with Open Questions

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

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here are three cash-producing companies to steer clear of and a few better alternatives.

Gap (GAP)

Trailing 12-Month Free Cash Flow Margin: 5.1%

Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE:GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.

Why Are We Cautious About GAP?

1. Products aren't resonating with the market as its revenue declined by 1.3% annually over the last three years
2. Free cash flow margin shrank by 2.2 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Gap’s stock price of $27.17 implies a valuation ratio of 11.8x forward P/E. To fully understand why you should be careful with GAP, check out our full research report (it’s free).

Restaurant Brands (QSR)

Trailing 12-Month Free Cash Flow Margin: 15.1%

Formed through a strategic merger, Restaurant Brands International (NYSE:QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.

Why Does QSR Give Us Pause?

1. Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its six-year trend
2. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 4.5 percentage points
3. 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Restaurant Brands is trading at $68.15 per share, or 17.4x forward P/E. Check out our free in-depth research report to learn more about why QSR doesn’t pass our bar.

Benchmark (BHE)

Trailing 12-Month Free Cash Flow Margin: 2.9%

Operating as a critical behind-the-scenes partner for complex technology products since 1979, Benchmark Electronics (NYSE:BHE) provides advanced manufacturing, engineering, and technology solutions for original equipment manufacturers across aerospace, medical, industrial, and technology sectors.

Why Do We Think Twice About BHE?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.1% annually over the last two years
2. Earnings per share lagged its peers over the last two years as they only grew by 5.4% annually
3. Low free cash flow margin of 0.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

At $51.63 per share, Benchmark trades at 20.5x forward P/E. To fully understand why you should be careful with BHE, check out our full research report (it’s free).

Stocks We Like More

Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.