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. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.

Two Stocks to Sell:

NXP Semiconductors (NXPI)

Trailing 12-Month Free Cash Flow Margin: 15.1%

Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.

Why Are We Hesitant About NXPI?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.3% annually over the last two years
2. Sales are projected to tank by 1.6% over the next 12 months as its demand continues evaporating
3. Free cash flow margin dropped by 10.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

NXP Semiconductors is trading at $199 per share, or 16x forward P/E. If you’re considering NXPI for your portfolio, see our FREE research report to learn more.

Align Technology (ALGN)

Trailing 12-Month Free Cash Flow Margin: 18.2%

Pioneering an alternative to traditional metal braces with nearly invisible plastic aligners, Align Technology (NASDAQ: ALGN) designs and manufactures Invisalign clear aligners, iTero intraoral scanners, and dental CAD/CAM software for orthodontic and restorative treatments.

Why Does ALGN Give Us Pause?

1. Underwhelming clear aligner shipments over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Free cash flow margin shrank by 7.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $183.34 per share, Align Technology trades at 17.6x forward P/E. Read our free research report to see why you should think twice about including ALGN in your portfolio.

One Stock to Watch:

McDonald's (MCD)

Trailing 12-Month Free Cash Flow Margin: 26.1%

With nicknames spanning Mickey D's in the U.S. to Makku in Japan, McDonald’s (NYSE: MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.

Why Does MCD Stand Out?

1. Same-store sales growth averaged 2.8% over the past two years, showing it’s bringing new and repeat diners into its restaurants
2. Highly-profitable franchise model results in strong unit economics and a best-in-class gross margin of 56.9%
3. MCD is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

McDonald’s stock price of $314.80 implies a valuation ratio of 25x forward P/E. Is now a good time to buy? Find out in our full 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 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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 Kadant (+351% five-year return). Find your next big winner with StockStory today for free.