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 that may struggle to keep up.
Two Stocks to Sell:
Kellanova (K)
Trailing 12-Month Free Cash Flow Margin: 4.7%
With Corn Flakes as its first and most iconic product, Kellanova (NYSE: K) is a packaged foods company that is dominant in the cereal and snack categories.
Why Is K Not Exciting?
- Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Anticipated sales growth of 2.4% for the next year implies demand will be shaky
- Issuance of new shares over the last three years caused its earnings per share to fall by 3.5% annually
At $83.27 per share, Kellanova trades at 22.4x forward P/E. Dive into our free research report to see why there are better opportunities than K.
Omnicom Group (OMC)
Trailing 12-Month Free Cash Flow Margin: 10.4%
With a vast network of creative agencies that helped craft some of the most memorable ad campaigns in history, Omnicom Group (NYSE: OMC) is a strategic holding company that provides advertising, marketing, and communications services to many of the world's largest companies.
Why Does OMC Fall Short?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Free cash flow margin shrank by 7.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Omnicom Group is trading at $73.90 per share, or 8.1x forward P/E. If you’re considering OMC for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Seagate Technology (STX)
Trailing 12-Month Free Cash Flow Margin: 12.7%
The developer of the original 5.25inch hard disk drive, Seagate (NASDAQ: STX) is a leading producer of data storage solutions, including hard drives and Solid State Drives (SSDs) used in PCs and data centers.
Why Do We Like STX?
- Annual revenue growth of 18.5% over the last two years was superb and indicates its market share increased during this cycle
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Operating margin expansion of 6.9 percentage points over the last five years shows the company optimized its expenses
Seagate Technology’s stock price of $274.74 implies a valuation ratio of 22.9x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth 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 Growth Stocks for this month. 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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