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 face some trouble.
Two Stocks to Sell:
MGP Ingredients (MGPI)
Trailing 12-Month Free Cash Flow Margin: 8.9%
Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQ: MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry
Why Do We Avoid MGPI?
- Sales tumbled by 2.8% annually over the last three years, showing consumer trends are working against its favor
- Sales are projected to tank by 19.8% over the next 12 months as its demand continues evaporating
- Operating margin declined by 10 percentage points over the last year as its sales cratered
MGP Ingredients’s stock price of $30 implies a valuation ratio of 11.2x forward P/E. If you’re considering MGPI for your portfolio, see our FREE research report to learn more.
PVH (PVH)
Trailing 12-Month Free Cash Flow Margin: 6.8%
Founded in 1881 by a husband and wife duo, PVH (NYSE: PVH) is a global fashion conglomerate with iconic brands like Calvin Klein and Tommy Hilfiger.
Why Do We Think PVH Will Underperform?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Estimated sales growth of 1.8% for the next 12 months is soft and implies weaker demand
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $65.92 per share, PVH trades at 4.9x forward P/E. Read our free research report to see why you should think twice about including PVH in your portfolio.
One Stock to Watch:
Wabtec (WAB)
Trailing 12-Month Free Cash Flow Margin: 14%
Also known as Wabtec, Westinghouse Air Brake Technologies (NYSE: WAB) provides equipment, systems, and related software for the railway industry.
Why Do We Like WAB?
- Average organic revenue growth of 9.5% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share repurchases over the last two years enabled its annual earnings per share growth of 25.5% to outpace its revenue gains
Wabtec is trading at $206 per share, or 23.7x forward P/E. 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 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
