While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
Zeta (ZETA)
Trailing 12-Month Free Cash Flow Margin: 9.8%
Co-founded by former Apple CEO John Sculley, Zeta Global (NYSE: ZETA) provides software and data analytics tools that help companies market their products to billions of customers.
Why Is ZETA Not Exciting?
- Competitive market dynamics make it difficult to retain customers, leading to a weak 96.9% net revenue retention rate
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 60.4%
- Operating losses show it sacrificed profitability while scaling the business
At $13.30 per share, Zeta trades at 2.2x forward price-to-sales. Read our free research report to see why you should think twice about including ZETA in your portfolio.
Packaging Corporation of America (PKG)
Trailing 12-Month Free Cash Flow Margin: 6.2%
Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.
Why Do We Pass on PKG?
- Annual revenue growth of 1.4% over the last two years was below our standards for the industrials sector
- Anticipated sales growth of 3.6% for the next year implies demand will be shaky
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
Packaging Corporation of America is trading at $181.42 per share, or 11.1x forward EV-to-EBITDA. If you’re considering PKG for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
H&R Block (HRB)
Trailing 12-Month Free Cash Flow Margin: 17.5%
Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block (NYSE: HRB) is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.
Why Should You Buy HRB?
- Annual revenue growth of 30.5% over the last five years was superb and indicates its market share is rising
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 41.5% exceeded its revenue gains over the last five years
- ROIC punches in at 56.7%, illustrating management’s expertise in identifying profitable investments, and its returns are growing as it capitalizes on even better market opportunities
H&R Block’s stock price of $56.99 implies a valuation ratio of 16.9x forward EV-to-EBITDA. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
