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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. 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:
AMC Networks (AMCX)
Trailing 12-Month Free Cash Flow Margin: 13.7%
Originally the joint-venture of four cable television companies, AMC Networks (NASDAQ: AMCX) is a broadcaster producing a diverse range of television shows and movies.
Why Do We Think AMCX Will Underperform?
- Sales tumbled by 4.6% annually over the last five years, showing consumer trends are working against its favor
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 3.6 percentage points over the next year
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $6.15 per share, AMC Networks trades at 1.7x forward price-to-earnings. Check out our free in-depth research report to learn more about why AMCX doesn’t pass our bar.
Ruger (RGR)
Trailing 12-Month Free Cash Flow Margin: 6.5%
Founded in 1949, Ruger (NYSE: RGR) is an American manufacturer of firearms for the commercial sporting market.
Why Does RGR Worry Us?
- Annual sales declines of 5.2% for the past two years show its products and services struggled to connect with the market
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
Ruger is trading at $39.51 per share, or 15.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than RGR.
One Stock to Buy:
EMCOR (EME)
Trailing 12-Month Free Cash Flow Margin: 9.2%
Through its network of over 70 subsidiaries, EMCOR (NYSE: EME) provides electrical, mechanical, and building construction and services
Why Do We Love EME?
- Impressive 14.7% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share buybacks catapulted its annual earnings per share growth to 62.4%, which outperformed its revenue gains over the last two years
- Improving returns on capital reflect management’s ability to monetize investments
EMCOR’s stock price of $366.51 implies a valuation ratio of 15.6x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
