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. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
Akamai (AKAM)
Trailing 12-Month Free Cash Flow Margin: 17.7%
Founded in 1999 by two engineers from MIT, Akamai (NASDAQ: AKAM) provides software for organizations to efficiently deliver web content to their customers.
Why Do We Pass on AKAM?
- Annual revenue growth of 4.5% over the last three years was well below our standards for the software sector
- Sky-high servicing costs result in an inferior gross margin of 59.1% that must be offset through increased usage
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
Akamai’s stock price of $76.51 implies a valuation ratio of 2.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than AKAM.
Lockheed Martin (LMT)
Trailing 12-Month Free Cash Flow Margin: 6.9%
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.
Why Is LMT Risky?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 3.3% for the last five years
- Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
- Eroding returns on capital suggest its historical profit centers are aging
Lockheed Martin is trading at $469.66 per share, or 16.7x forward P/E. If you’re considering LMT for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Booking (BKNG)
Trailing 12-Month Free Cash Flow Margin: 35.2%
Formerly known as The Priceline Group, Booking Holdings (NASDAQ: BKNG) is the world’s largest online travel agency.
Why Is BKNG a Good Business?
- Has the opportunity to boost monetization through new features and premium offerings as its room nights booked have grown by 9.7% annually over the last two years
- Share repurchases over the last three years enabled its annual earnings per share growth of 51.8% to outpace its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $5,655 per share, Booking trades at 20.4x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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