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. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one that may struggle to keep up.
One Stock to Sell:
Warner Bros. Discovery (WBD)
Trailing 12-Month Free Cash Flow Margin: 10.9%
Formed from the merger of WarnerMedia and Discovery, Warner Bros. Discovery (NASDAQ: WBD) is a multinational media and entertainment company, offering television networks, streaming services, and film and television production.
Why Should You Sell WBD?
- Annual sales declines of 5.1% for the past two years show its products and services struggled to connect with the market
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 32.2% annually
Warner Bros. Discovery is trading at $22.76 per share, or 6.6x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including WBD in your portfolio.
Two Stocks to Watch:
Cloudflare (NET)
Trailing 12-Month Free Cash Flow Margin: 10.4%
With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE: NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.
Why Will NET Outperform?
- Billings growth has averaged 34.2% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Expected revenue growth of 27.5% for the next year suggests its market share will rise
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
At $202.12 per share, Cloudflare trades at 28.7x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Sprouts (SFM)
Trailing 12-Month Free Cash Flow Margin: 5.3%
Playing on the secular trend of healthier living, Sprouts Farmers Market (NASDAQ: SFM) is a grocery store chain emphasizing natural and organic products.
Why Are We Positive On SFM?
- Fast expansion of new stores to reach markets with few or no locations is justified by its same-store sales growth
- Same-store sales growth averaged 7.7% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
Sprouts’s stock price of $82.59 implies a valuation ratio of 14.7x forward P/E. 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
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% 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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