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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
Kimball Electronics (KE)
Trailing 12-Month Free Cash Flow Margin: 9.5%
Founded in 1961, Kimball Electronics (NYSE: KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Why Should You Sell KE?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5% annually over the last two years
- Earnings per share have dipped by 13.7% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Low free cash flow margin of -0.3% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $18.10 per share, Kimball Electronics trades at 16.9x forward P/E. Read our free research report to see why you should think twice about including KE in your portfolio.
Two Stocks to Watch:
Wingstop (WING)
Trailing 12-Month Free Cash Flow Margin: 13.7%
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
Why Will WING Beat the Market?
- Average same-store sales growth of 16.9% over the past two years indicates its restaurants are resonating with diners
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 25.3%
- Robust free cash flow margin of 15% gives it many options for capital deployment
Wingstop is trading at $341.70 per share, or 86x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Tenet Healthcare (THC)
Trailing 12-Month Free Cash Flow Margin: 6.9%
With a network spanning nine states and serving primarily urban and suburban communities, Tenet Healthcare (NYSE: THC) operates a nationwide network of hospitals, ambulatory surgery centers, and outpatient facilities providing acute care and specialty healthcare services.
Why Could THC Be a Winner?
- Share repurchases over the last five years enabled its annual earnings per share growth of 30.7% to outpace its revenue gains
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its rising returns show it’s making even more lucrative bets
- Improving returns on capital reflect management’s ability to monetize investments
Tenet Healthcare’s stock price of $165 implies a valuation ratio of 13.7x 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 Strong Momentum Stocks for this week. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
