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 best left off your watchlist.
Two Stocks to Sell:
Sirius XM (SIRI)
Trailing 12-Month Free Cash Flow Margin: 10.9%
Known for its commercial-free music channels, Sirius XM (NASDAQ: SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.
Why Do We Steer Clear of SIRI?
- Number of core subscribers has disappointed over the past two years, indicating weak demand for its offerings
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 43.5% annually while its revenue grew
- Eroding returns on capital suggest its historical profit centers are aging
At $23.20 per share, Sirius XM trades at 7.8x forward P/E. Dive into our free research report to see why there are better opportunities than SIRI.
Jacobs Solutions (J)
Trailing 12-Month Free Cash Flow Margin: 5%
With a workforce of approximately 45,000 professionals tackling complex challenges from water scarcity to cybersecurity, Jacobs Solutions (NYSE: J) provides engineering, consulting, and technical services focused on infrastructure, sustainability, and advanced technology solutions.
Why Do We Pass on J?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Backlog failed to grow over the past two years, suggesting the company may need to tweak its product roadmap and go-to-market strategy
- Earnings per share fell by 9.6% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
Jacobs Solutions’s stock price of $137.73 implies a valuation ratio of 21.4x forward P/E. Check out our free in-depth research report to learn more about why J doesn’t pass our bar.
One Stock to Buy:
Rollins (ROL)
Trailing 12-Month Free Cash Flow Margin: 17.3%
Operating under multiple brands like Orkin and HomeTeam Pest Defense, Rollins (NYSE: ROL) provides pest and wildlife control services to residential and commercial customers.
Why Are We Bullish on ROL?
- Annual revenue growth of 11.9% over the past two years was outstanding, reflecting market share gains this cycle
- Offerings are difficult to replicate at scale and result in a best-in-class gross margin of 52.1%
- Robust free cash flow margin of 16.7% gives it many options for capital deployment
Rollins is trading at $55.66 per share, or 48.4x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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 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-small-cap company Exlservice (+354% 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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