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 leverages its financial strength to beat its competitors and two that may face some trouble.

Two Stocks to Sell:

Churchill Downs (CHDN)

Trailing 12-Month Free Cash Flow Margin: 10.5%

Famous for hosting the Kentucky Derby, Churchill Downs (NASDAQ: CHDN) operates a horse racing, online wagering, and gaming entertainment business in the United States.

Why Does CHDN Fall Short?

1. Estimated sales growth of 4.8% for the next 12 months implies demand will slow from its two-year trend
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.5% for the last two years
3. ROIC of 7.8% reflects management’s challenges in identifying attractive investment opportunities

At $106 per share, Churchill Downs trades at 16.4x forward P/E. Check out our free in-depth research report to learn more about why CHDN doesn’t pass our bar.

Marriott (MAR)

Trailing 12-Month Free Cash Flow Margin: 7.3%

Founded by J. Willard Marriott in 1927, Marriott International (NASDAQ: MAR) is a global hospitality company with a portfolio of over 7,000 properties and 30 brands, spanning 130+ countries and territories.

Why Is MAR Not Exciting?

1. Revenue per room has underperformed over the past two years, suggesting it may need to develop new facilities
2. Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

Marriott is trading at $282.30 per share, or 27.4x forward P/E. To fully understand why you should be careful with MAR, check out our full research report (it’s free).

One Stock to Buy:

Howmet (HWM)

Trailing 12-Month Free Cash Flow Margin: 13.5%

Inventing the first forged aluminum truck wheel, Howmet (NYSE: HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.

Why Do We Love HWM?

1. Market share has increased this cycle as its 12.7% annual revenue growth over the last two years was exceptional
2. Share buybacks catapulted its annual earnings per share growth to 40.5%, which outperformed its revenue gains over the last two years
3. Free cash flow margin increased by 12.6 percentage points over the last five years, giving the company more capital to invest or return to shareholders

Howmet’s stock price of $178.87 implies a valuation ratio of 52.7x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth 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 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

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