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.
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 face some trouble.
One Industrials Stock to Sell:
H&E Equipment Services (HEES)
Trailing 12-Month Free Cash Flow Margin: 14.6%
Founded after recognizing a growth trend along the Mississippi River and opportunities developing in the earthmoving and construction equipment business, H&E (NASDAQ: HEES) offers machinery for companies to purchase or rent.
Why Does HEES Give Us Pause?
- 2.1% annual revenue growth over the last five years was slower than its industrials peers
- Earnings per share have contracted by 16% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Poor free cash flow margin of 0.5% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
H&E Equipment Services’s stock price of $95.18 implies a valuation ratio of 6.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including HEES in your portfolio.
Two Industrials Stocks to Watch:
Powell (POWL)
Trailing 12-Month Free Cash Flow Margin: 4.7%
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE: POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Why Are We Fans of POWL?
- Market share has increased this cycle as its 34.8% annual revenue growth over the last two years was exceptional
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Earnings per share grew by 209% annually over the last two years, massively outpacing its peers
At $194.65 per share, Powell trades at 13.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Primoris (PRIM)
Trailing 12-Month Free Cash Flow Margin: 6.8%
Listed on the NASDAQ in 2008, Primoris (NYSE: PRIM) builds, maintains, and upgrades infrastructure in the utility, energy, and civil construction industries.
Why Does PRIM Stand Out?
- Annual revenue growth of 16.2% over the past two years was outstanding, reflecting market share gains this cycle
- Sales pipeline is in good shape as its backlog averaged 148% growth over the past two years
- Earnings per share grew by 26.7% annually over the last two years, massively outpacing its peers
Primoris is trading at $77.20 per share, or 17.1x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
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