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 is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.

Two Stocks to Sell:

PagerDuty (PD)

Trailing 12-Month Free Cash Flow Margin: 23.2%

Started by three former Amazon engineers, PagerDuty (NYSE: PD) is a software-as-a-service platform that helps companies respond to IT incidents fast and make sure that any downtime is minimized.

Why Do We Think Twice About PD?

1. Average billings growth of 7% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
2. Estimated sales growth of 6.2% for the next 12 months implies demand will slow from its three-year trend
3. Suboptimal cost structure is highlighted by its history of operating margin losses

PagerDuty is trading at $15 per share, or 2.7x forward price-to-sales. Read our free research report to see why you should think twice about including PD in your portfolio.

ADT (ADT)

Trailing 12-Month Free Cash Flow Margin: 15.7%

Founded in 1874 and headquartered in Boca Raton, Florida, ADT (NYSE: ADT) is a provider of security, automation, and smart home solutions, offering comprehensive services for home and business protection.

Why Are We Hesitant About ADT?

1. Demand for its offerings was relatively low as its number of customers has underwhelmed
2. Anticipated sales growth of 4.3% for the next year implies demand will be shaky
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

ADT’s stock price of $8.40 implies a valuation ratio of 9.8x forward P/E. Check out our free in-depth research report to learn more about why ADT doesn’t pass our bar.

One Stock to Buy:

Duolingo (DUOL)

Trailing 12-Month Free Cash Flow Margin: 35.6%

Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ: DUOL) is a mobile app helping people learn new languages.

Why Should You Buy DUOL?

1. Has the opportunity to boost monetization through new features and premium offerings as its monthly active users have grown by 39.8% annually over the last two years
2. Additional sales over the last three years increased its profitability as the 178% annual growth in its earnings per share outpaced its revenue
3. Strong free cash flow margin of 34.4% enables it to reinvest or return capital consistently, and its growing cash flow gives it even more resources to deploy

At $400.10 per share, Duolingo trades at 64.5x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

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 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today