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.

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 best left off your watchlist.

Two Stocks to Sell:

American Eagle (AEO)

Trailing 12-Month Free Cash Flow Margin: 4%

With a heavy focus on denim, American Eagle Outfitters (NYSE: AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.

Why Does AEO Give Us Pause?

1. Sales trends were unexciting over the last six years as its 4.3% annual growth was below the typical consumer retail company
2. Projected sales decline of 1.9% for the next 12 months points to a tough demand environment ahead
3. Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging

American Eagle is trading at $9.87 per share, or 7.9x forward P/E. Check out our free in-depth research report to learn more about why AEO doesn’t pass our bar.

Pool (POOL)

Trailing 12-Month Free Cash Flow Margin: 9.2%

Founded in 1993 and headquartered in Louisiana, Pool (NASDAQ: POOL) is one of the largest wholesale distributors of swimming pool supplies, equipment, and related leisure products.

Why Do We Think Twice About POOL?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Anticipated sales growth of 1.9% for the next year implies demand will be shaky
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $292.74 per share, Pool trades at 25.6x forward P/E. If you’re considering POOL for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Cal-Maine (CALM)

Trailing 12-Month Free Cash Flow Margin: 22.6%

Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.

Why Are We Positive On CALM?

1. Annual revenue growth of 35.3% over the past three years was outstanding, reflecting market share gains
2. Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 280% outpaced its revenue gains
3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its growing cash flow gives it even more resources to deploy

Cal-Maine’s stock price of $99.20 implies a valuation ratio of 9.5x forward P/E. 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

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