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.
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 reinvests wisely to drive long-term success and two that may struggle to keep up.
Two Stocks to Sell:
Inspired (INSE)
Trailing 12-Month Free Cash Flow Margin: 6.3%
Specializing in digital casino gaming, Inspired (NASDAQ: INSE) is a provider of gaming hardware, virtual sports platforms, and server-based gaming systems.
Why Does INSE Give Us Pause?
- Annual revenue growth of 1.9% over the last two years was below our standards for the consumer discretionary sector
- Estimated sales growth of 2.3% for the next 12 months is soft and implies weaker demand
- Low free cash flow margin of 3.5% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $8.28 per share, Inspired trades at 2.2x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why INSE doesn’t pass our bar.
Hudson Technologies (HDSN)
Trailing 12-Month Free Cash Flow Margin: 44.5%
Founded in 1991, Hudson Technologies (NASDAQ: HDSN) specializes in refrigerant services and solutions, providing refrigerant sales, reclamation, and recycling.
Why Are We Wary of HDSN?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 15.5% annually over the last two years
- Earnings per share have dipped by 51.9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Hudson Technologies is trading at $7.75 per share, or 10.2x forward EV-to-EBITDA. If you’re considering HDSN for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
OSI Systems (OSIS)
Trailing 12-Month Free Cash Flow Margin: 2.5%
With security scanners deployed at airports and borders worldwide and patient monitors used in hospitals across the globe, OSI Systems (NASDAQ: OSIS) designs and manufactures specialized electronic systems for security screening, patient monitoring, and optoelectronic applications.
Why Are We Positive On OSIS?
- Market share has increased this cycle as its 18.5% annual revenue growth over the last two years was exceptional
- Earnings per share grew by 27.4% annually over the last two years, massively outpacing its peers
- Rising returns on capital show the company is starting to reap the benefits of its past investments
OSI Systems’s stock price of $229.78 implies a valuation ratio of 23.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
