Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
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:
Victoria's Secret (VSCO)
Trailing 12-Month Free Cash Flow Margin: 3.9%
Spun off from L Brands in 2020, Victoria’s Secret (NYSE: VSCO) is an intimate clothing and beauty retailer that sells its own brands of lingerie, undergarments, and personal fragrances.
Why Is VSCO Risky?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Subpar operating margin of 4.5% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Earnings per share have contracted by 23.9% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Victoria's Secret’s stock price of $30 implies a valuation ratio of 15.9x forward P/E. Read our free research report to see why you should think twice about including VSCO in your portfolio.
IDEX (IEX)
Trailing 12-Month Free Cash Flow Margin: 17.6%
Founded in 1988, IDEX (NYSE: IEX) is a global manufacturer specializing in highly engineered products such as pumps, flow meters, and fluidics systems for various industries.
Why Do We Pass on IEX?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Performance over the past two years shows each sale was less profitable, as its earnings per share fell by 4% annually
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $165.03 per share, IDEX trades at 20.1x forward P/E. To fully understand why you should be careful with IEX, check out our full research report (it’s free for active Edge members).
One Stock to Watch:
Freshworks (FRSH)
Trailing 12-Month Free Cash Flow Margin: 24.5%
Starting as a customer service solution before expanding into a comprehensive software suite, Freshworks (NASDAQ: FRSH) provides AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales, and marketing functions.
Why Are We Fans of FRSH?
- Annual revenue growth of 30.5% over the past five years was outstanding, reflecting market share gains
- Ability to secure long-term commitments with customers is evident in its 20.9% ARR growth over the last year
- Superior software functionality and low servicing costs lead to a premier gross margin of 84.6%
Freshworks is trading at $10.83 per share, or 3.7x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 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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