A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. 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:
Simply Good Foods (SMPL)
Trailing 12-Month Free Cash Flow Margin: 12.7%
Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ: SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.
Why Is SMPL Not Exciting?
- Revenue base of $1.41 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 3.1 percentage points
- Underwhelming 8% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $36.11 per share, Simply Good Foods trades at 18.1x forward price-to-earnings. To fully understand why you should be careful with SMPL, check out our full research report (it’s free).
AECOM (ACM)
Trailing 12-Month Free Cash Flow Margin: 4.5%
Founded in 1990 when a group of engineers from five companies decided to merge, AECOM (NYSE: ACM) provides various infrastructure consulting services.
Why Does ACM Give Us Pause?
- Flat backlog over the past two years has disappointed and shows fewer customers signed long-term contracts
- Gross margin of 6.3% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Subpar operating margin of 4.2% constrains its ability to invest in process improvements or effectively respond to new competitive threats
AECOM is trading at $99.98 per share, or 19.1x forward price-to-earnings. If you’re considering ACM for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Dutch Bros (BROS)
Trailing 12-Month Free Cash Flow Margin: 1.9%
Started in 1992 by two brothers as a single pushcart, Dutch Bros (NYSE: BROS) is a dynamic coffee chain that’s captured the hearts of coffee enthusiasts across the United States.
Why Is BROS on Our Radar?
- Fast expansion of new restaurants to reach markets with few or no locations is justified by its same-store sales growth
- Same-store sales growth averaged 4.3% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
Dutch Bros’s stock price of $60.25 implies a valuation ratio of 112.8x forward price-to-earnings. Is now a good time to buy? Find out 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
