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.
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 two cash-producing companies that excel at turning cash into shareholder value and one that may struggle to keep up.
One Stock to Sell:
CRA (CRAI)
Trailing 12-Month Free Cash Flow Margin: 2.3%
Often retained for high-stakes matters with multibillion-dollar implications, CRA International (NASDAQ: CRAI) provides economic, financial, and management consulting services to corporations, law firms, and government agencies for litigation, regulatory proceedings, and business strategy.
Why Does CRAI Give Us Pause?
- Smaller revenue base of $697.5 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- 11 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
CRA’s stock price of $185.95 implies a valuation ratio of 23.1x forward P/E. Read our free research report to see why you should think twice about including CRAI in your portfolio.
Two Stocks to Watch:
ESCO (ESE)
Trailing 12-Month Free Cash Flow Margin: 12.3%
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
Why Do We Watch ESE?
- Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 18.2%
- Operating margin expanded by 3.1 percentage points over the last five years as it scaled and became more efficient
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 20.7% annually
At $178.40 per share, ESCO trades at 28.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Waste Connections (WCN)
Trailing 12-Month Free Cash Flow Margin: 13.5%
Operating a network of municipal solid waste landfills in the U.S. and Canada, Waste Connections (NYSE: WCN) is North America's third-largest waste management company providing collection, disposal, and recycling services.
Why Does WCN Catch Our Eye?
- Annual revenue growth of 10.5% over the last five years was superb and indicates its market share increased during this cycle
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Robust free cash flow margin of 15.2% gives it many options for capital deployment
Waste Connections is trading at $196.84 per share, or 36.4x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 183% over the last five years (as of March 31st 2025).
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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
