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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
Guidewire (GWRE)
Trailing 12-Month Free Cash Flow Margin: 20.4%
Founded by two individuals involved in the development of leading procurement software Ariba, Guidewire (NYSE: GWRE) offers insurance companies a software-as-a-service platform to help sell their products and manage their workflows.
Why Do We Think Twice About GWRE?
- 12.6% annual revenue growth over the last three years was slower than its software peers
- High servicing costs result in a relatively inferior gross margin of 61.9% that must be offset through increased usage
Guidewire’s stock price of $223 implies a valuation ratio of 14.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than GWRE.
Matson (MATX)
Trailing 12-Month Free Cash Flow Margin: 13.7%
Founded by a Swedish orphan, Matson (NYSE: MATX) is a provider of ocean transportation and logistics services.
Why Are We Hesitant About MATX?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.3% annually over the last two years
- Earnings per share have contracted by 11.6% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $109.41 per share, Matson trades at 11x forward P/E. Check out our free in-depth research report to learn more about why MATX doesn’t pass our bar.
One Stock to Buy:
Stride (LRN)
Trailing 12-Month Free Cash Flow Margin: 10.7%
Formerly known as K12, Stride (NYSE: LRN) is an education technology company providing education solutions through digital platforms.
Why Is LRN a Good Business?
- Number of enrollments has surged, pointing to elevated demand
- Free cash flow margin grew by 6 percentage points over the last five years, giving the company more chips to play with
- Rising returns on capital show management is finding more attractive investment opportunities
Stride is trading at $130 per share, or 17.4x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. 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).
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