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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. 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:
TreeHouse Foods (THS)
Trailing 12-Month Free Cash Flow Margin: 3.8%
Whether it be packaged crackers, broths, or beverages, Treehouse Foods (NYSE: THS) produces a wide range of private-label foods for grocery and food service customers.
Why Do We Steer Clear of THS?
- Falling unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 16.5% that must be offset through higher volumes
- Underwhelming 1.4% return on capital reflects management’s difficulties in finding profitable growth opportunities
TreeHouse Foods’s stock price of $20.63 implies a valuation ratio of 10.7x forward P/E. If you’re considering THS for your portfolio, see our FREE research report to learn more.
Douglas Dynamics (PLOW)
Trailing 12-Month Free Cash Flow Margin: 9%
Once manufacturing snowplows designed for the iconic jeep vehicle precursor, Douglas Dynamics (NYSE: PLOW) offers snow and ice equipment for the roads and sidewalks.
Why Do We Avoid PLOW?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Earnings per share fell by 5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- 5 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Douglas Dynamics is trading at $30.15 per share, or 15.6x forward P/E. Read our free research report to see why you should think twice about including PLOW in your portfolio.
One Stock to Buy:
United Therapeutics (UTHR)
Trailing 12-Month Free Cash Flow Margin: 38.2%
Founded by a mother seeking treatment for her daughter's pulmonary arterial hypertension, United Therapeutics (NASDAQ: UTHR) develops and commercializes medications for chronic lung diseases and other life-threatening conditions, with a focus on pulmonary hypertension treatments.
Why Are We Backing UTHR?
- Market share has increased this cycle as its 22.9% annual revenue growth over the last two years was exceptional
- Robust free cash flow margin of 36% gives it many options for capital deployment
- Rising returns on capital show management is finding more attractive investment opportunities
At $296 per share, United Therapeutics trades at 10.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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
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