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. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.
Two Stocks to Sell:
Home Depot (HD)
Trailing 12-Month Free Cash Flow Margin: 9.3%
Founded and headquartered in Atlanta, Georgia, Home Depot (NYSE: HD) is a home improvement retailer that sells everything from tools to building materials to appliances.
Why Does HD Give Us Pause?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Estimated sales growth of 1.6% for the next 12 months implies demand will slow from its six-year trend
- 2.5 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
At $370.66 per share, Home Depot trades at 24.3x forward P/E. Dive into our free research report to see why there are better opportunities than HD.
Werner (WERN)
Trailing 12-Month Free Cash Flow Margin: -0.5%
Conducting business in over a 100 countries, Werner (NASDAQ: WERN) offers full-truckload, less-than-truckload, and intermodal delivery services.
Why Should You Dump WERN?
- Annual sales declines of 5.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 37.2% annually while its revenue grew
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Werner’s stock price of $27.60 implies a valuation ratio of 35x forward P/E. Read our free research report to see why you should think twice about including WERN in your portfolio.
One Stock to Buy:
Axon (AXON)
Trailing 12-Month Free Cash Flow Margin: 16.8%
Providing body cameras and tasers for first responders, AXON (NASDAQ: AXON) develops technology solutions and weapons products for military, law enforcement, and civilians.
Why Is AXON a Good Business?
- Average unit sales growth of 32% over the past two years reflects steady demand for its products
- Free cash flow margin increased by 20.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Improving returns on capital suggest its past investments are beginning to deliver value
Axon is trading at $745 per share, or 125.9x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out 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 Tecnoglass (+1,754% 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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