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. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.
Two Stocks to Sell:
Allegion (ALLE)
Trailing 12-Month Free Cash Flow Margin: 17.6%
Allegion plc (NYSE: ALLE) is a provider of security products and solutions that keep people and assets safe and secure in various environments.
Why Does ALLE Give Us Pause?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2.7 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $174.12 per share, Allegion trades at 21.3x forward P/E. Read our free research report to see why you should think twice about including ALLE in your portfolio.
Masimo (MASI)
Trailing 12-Month Free Cash Flow Margin: 12%
Founded in 1989 to solve the "unsolvable problem" of accurate pulse oximetry during patient movement, Masimo (NASDAQ: MASI) develops and manufactures noninvasive patient monitoring technologies, including its breakthrough pulse oximetry systems that accurately measure blood oxygen levels even during patient movement.
Why Do We Think Twice About MASI?
- Annual sales declines of 18.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Masimo’s stock price of $145.56 implies a valuation ratio of 27.6x forward P/E. Dive into our free research report to see why there are better opportunities than MASI.
One Stock to Buy:
Shopify (SHOP)
Trailing 12-Month Free Cash Flow Margin: 18.1%
Starting with just three people selling snowboards online in 2004, Shopify (NYSE: SHOP) provides a comprehensive platform that enables merchants of all sizes to create, manage and grow their businesses across multiple sales channels.
Why Will SHOP Outperform?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 29.5% over the last year
- Market share will likely rise over the next 12 months as its expected revenue growth of 23.9% is robust
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
Shopify is trading at $155.99 per share, or 17.3x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. 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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