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. That said, 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:
Paychex (PAYX)
Trailing 12-Month Free Cash Flow Margin: 33%
Once known as the go-to service for small business payroll needs, Paychex (NASDAQ: PAYX) provides payroll processing, HR services, employee benefits administration, and insurance solutions to small and medium-sized businesses.
Why Are We Hesitant About PAYX?
- Muted 6.7% annual revenue growth over the last two years shows its demand lagged behind its software peers
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 3.1 percentage points
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 5 percentage points
At $113.43 per share, Paychex trades at 6.1x forward price-to-sales. Read our free research report to see why you should think twice about including PAYX in your portfolio.
Merit Medical Systems (MMSI)
Trailing 12-Month Free Cash Flow Margin: 14%
Founded in 1987 and now offering over 1,700 patented products across global markets, Merit Medical Systems (NASDAQ: MMSI) manufactures and markets specialized medical devices used in minimally invasive procedures for cardiology, radiology, oncology, critical care, and endoscopy.
Why Does MMSI Worry Us?
- Revenue base of $1.48 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Merit Medical Systems is trading at $84.29 per share, or 21.6x forward P/E. If you’re considering MMSI for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
The Ensign Group (ENSG)
Trailing 12-Month Free Cash Flow Margin: 6%
Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ: ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.
Why Does ENSG Stand Out?
- Products are seeing elevated demand as its unit sales averaged 11.8% growth over the past two years
- Projected revenue growth of 15.5% for the next 12 months suggests its momentum from the last two years will persist
- Earnings per share have massively outperformed its peers over the last five years, increasing by 15.5% annually
The Ensign Group’s stock price of $178.96 implies a valuation ratio of 25.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 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-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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