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. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.

Two Stocks to Sell:

Roku (ROKU)

Trailing 12-Month Free Cash Flow Margin: 5.2%

Spun out from Netflix, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.

Why Does ROKU Give Us Pause?

1. Decision to emphasize platform growth over monetization has contributed to 2.4% annual declines in its average revenue per user
2. EBITDA margin declined by 10.5 percentage points over the last few years as it scaled
3. Earnings per share fell by 32.8% annually over the last three years while its revenue grew, showing its incremental sales were much less profitable

At $66 per share, Roku trades at 33x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including ROKU in your portfolio.

RTX (RTX)

Trailing 12-Month Free Cash Flow Margin: 6.7%

Originally focused on refrigeration technology, Raytheon (NSYE:RTX) provides a a variety of products and services to the aerospace and defense industries.

Why Is RTX Not Exciting?

1. Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
2. Performance over the past five years was negatively impacted by new share issuances as its earnings per share were flat while its revenue grew
3. ROIC of 2.5% reflects management’s challenges in identifying attractive investment opportunities

RTX is trading at $125.46 per share, or 20x forward price-to-earnings. To fully understand why you should be careful with RTX, check out our full research report (it’s free).

One Stock to Buy:

Ibotta (IBTA)

Trailing 12-Month Free Cash Flow Margin: 28.8%

Originally launched as a way to make grocery shopping more rewarding for budget-conscious consumers, Ibotta (NYSE: IBTA) is a mobile shopping app that allows consumers to earn cash back on everyday purchases by completing tasks and submitting receipts.

Why Is IBTA a Top Pick?

1. Market share has increased this cycle as its 32% annual revenue growth over the last two years was exceptional
2. Rapid growth in total redemptions demonstrates strong market adoption
3. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 58.8% outpaced its revenue gains

Ibotta’s stock price of $47.92 implies a valuation ratio of 13.2x forward price-to-earnings. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.