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.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may struggle to keep up.

Two Stocks to Sell:

Starbucks (SBUX)

Trailing 12-Month Free Cash Flow Margin: 7.6%

Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ: SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.

Why Does SBUX Give Us Pause?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its six-year trend
3. Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 3.6 percentage points

Starbucks is trading at $91.90 per share, or 29.1x forward P/E. To fully understand why you should be careful with SBUX, check out our full research report (it’s free).

Advanced Drainage (WMS)

Trailing 12-Month Free Cash Flow Margin: 12.7%

Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE: WMS) provides clean water management solutions to communities across America.

Why Are We Wary of WMS?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 2.8% annually over the last two years
2. Earnings per share have dipped by 2.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Free cash flow margin dropped by 6.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Advanced Drainage’s stock price of $115 implies a valuation ratio of 18.3x forward P/E. If you’re considering WMS for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Tractor Supply (TSCO)

Trailing 12-Month Free Cash Flow Margin: 4.1%

Started as a mail-order tractor parts business, Tractor Supply (NASDAQ: TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.

Why Are We Positive On TSCO?

1. Bold push to open new stores demonstrates an ambitious strategy to establish itself in underpenetrated territories
2. Sales outlook for the upcoming 12 months implies the business will stay on its desirable six-year growth trajectory
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures

At $51.71 per share, Tractor Supply trades at 23.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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