A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
OneWater (ONEW)
Trailing 12-Month Free Cash Flow Margin: 5.3%
A public company since early 2020, OneWater Marine (NASDAQ: ONEW) sells boats, yachts, and other marine products.
Why Are We Wary of ONEW?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Earnings per share have dipped by 54.5% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
OneWater’s stock price of $14.82 implies a valuation ratio of 8.2x forward P/E. Check out our free in-depth research report to learn more about why ONEW doesn’t pass our bar.
Two Stocks to Watch:
CAVA (CAVA)
Trailing 12-Month Free Cash Flow Margin: 4.9%
Starting from a single Washington, D.C. location, CAVA (NYSE: CAVA) operates a fast-casual restaurant chain offering customizable Mediterranean-inspired dishes.
Why Do We Watch CAVA?
- Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
- Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
- Free cash flow margin increased by 7.9 percentage points over the last year, giving the company more capital to invest or return to shareholders
At $79.04 per share, CAVA trades at 129.6x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Elevance Health (ELV)
Trailing 12-Month Free Cash Flow Margin: 2%
Formerly known as Anthem until its 2022 rebranding, Elevance Health (NYSE: ELV) is one of America's largest health insurers, serving approximately 47 million medical members through its network-based managed care plans.
Why Should You Buy ELV?
- Enormous revenue base of $183.3 billion gives it leverage over plan holders and advantageous reimbursement terms with healthcare providers
- Earnings growth has easily exceeded the peer group average over the last five years as its EPS has compounded at 11.5% annually
- ROIC punches in at 28.1%, illustrating management’s expertise in identifying profitable investments
Elevance Health is trading at $386.18 per share, or 10.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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