A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 are two cash-producing companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
Peloton (PTON)
Trailing 12-Month Free Cash Flow Margin: 15.5%
Started as a Kickstarter campaign, Peloton (NASDAQ: PTON) is a fitness technology company known for its at-home exercise equipment and interactive online workout classes.
Why Is PTON Risky?
- Number of connected fitness subscribers has disappointed over the past two years, indicating weak demand for its offerings
- Poor expense management has led to operating margin losses
- Sales over the last five years were less profitable as its earnings per share fell by 16.5% annually while its revenue was flat
Peloton is trading at $7.48 per share, or 39.3x forward P/E. Read our free research report to see why you should think twice about including PTON in your portfolio.
Two Stocks to Watch:
MongoDB (MDB)
Trailing 12-Month Free Cash Flow Margin: 10.5%
Named after "humongous database," reflecting its ability to handle massive data loads, MongoDB (NASDAQ: MDB) provides a flexible document-based database platform that helps developers build, deploy, and maintain modern applications more efficiently.
Why Do We Like MDB?
- Impressive 34.6% annual revenue growth over the last five years indicates it’s winning market share
- Ability to secure long-term commitments with customers is evident in its 25.2% ARR growth over the last year
At $371.74 per share, MongoDB trades at 11.8x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Cardinal Health (CAH)
Trailing 12-Month Free Cash Flow Margin: 1.9%
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE: CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Why Does CAH Stand Out?
- Enormous revenue base of $234.3 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Projected revenue growth of 12% for the next 12 months indicates demand will rise above its two-year trend
- Earnings per share grew by 9.4% annually over the last five years and easily exceeded the peer group average
Cardinal Health’s stock price of $205.60 implies a valuation ratio of 20.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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