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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
TaskUs (TASK)
Trailing 12-Month Free Cash Flow Margin: 10%
Starting as a virtual assistant service in 2008 before evolving into a global digital services provider, TaskUs (NASDAQ: TASK) provides outsourced digital services including customer experience management, content moderation, and AI data services to innovative technology companies.
Why Do We Think Twice About TASK?
- 1.8% annual revenue growth over the last two years was slower than its business services peers
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- ROIC of 5.4% reflects management’s challenges in identifying attractive investment opportunities
TaskUs is trading at $13.25 per share, or 9.7x forward P/E. Dive into our free research report to see why there are better opportunities than TASK.
Two Stocks to Watch:
Zscaler (ZS)
Trailing 12-Month Free Cash Flow Margin: 28.7%
After successfully selling all four of his previous cybersecurity companies, Jay Chaudhry's fifth venture, Zscaler (NASDAQ: ZS) offers software-as-a-service that helps companies securely connect to applications and networks in the cloud.
Why Is ZS a Good Business?
- Customers view its software as mission-critical to their operations as its ARR has averaged 26.7% growth over the last year
- Forecasted revenue growth of 19.7% for the next 12 months indicates its momentum over the last three years is sustainable
- Robust free cash flow margin of 28.7% gives it many options for capital deployment
At $230.26 per share, Zscaler trades at 12.2x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Astrana Health (ASTH)
Trailing 12-Month Free Cash Flow Margin: 2.2%
Formerly known as Apollo Medical Holdings until early 2024, Astrana Health (NASDAQ: ASTH) operates a technology-powered healthcare platform that enables physicians to deliver coordinated care while successfully participating in value-based payment models.
Why Could ASTH Be a Winner?
- Market share has increased this cycle as its 33.3% annual revenue growth over the last two years was exceptional
- Expected revenue growth of 32% for the next year suggests its market share will rise
- Earnings per share grew by 18.7% annually over the last five years, massively outpacing its peers
Astrana Health’s stock price of $32.49 implies a valuation ratio of 7.4x forward EV-to-EBITDA. Is now the right 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
