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:

Snap (SNAP)

Trailing 12-Month Free Cash Flow Margin: 5.3%

Founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, and originally called Picaboo, Snapchat (NYSE: SNAP) is an image centric social media network.

Why Does SNAP Give Us Pause?

1. Focus on expanding its platform has led to weaker growth in its average revenue per user
2. Costs have risen faster than its revenue over the last few years, causing its EBITDA margin to decline by 5.2 percentage points
3. Earnings per share fell by 10.2% annually over the last three years while its revenue grew, showing its incremental sales were much less profitable

At $9.32 per share, Snap trades at 24.3x forward EV/EBITDA. To fully understand why you should be careful with SNAP, check out our full research report (it’s free).

RE/MAX (RMAX)

Trailing 12-Month Free Cash Flow Margin: 14.8%

Short for Real Estate Maximums, RE/MAX (NYSE: RMAX) operates a real estate franchise network spanning over 100 countries and territories.

Why Are We Out on RMAX?

1. Sluggish trends in its agents suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 8.9% annually
3. Breakeven ROIC reflects management’s challenges in identifying attractive investment opportunities

RE/MAX is trading at $8.11 per share, or 6.2x forward P/E. Check out our free in-depth research report to learn more about why RMAX doesn’t pass our bar.

One Stock to Watch:

Humana (HUM)

Trailing 12-Month Free Cash Flow Margin: 2%

With over 80% of its revenue derived from federal government contracts, Humana (NYSE: HUM) provides health insurance plans and healthcare services to approximately 17 million members, with a strong focus on Medicare Advantage plans for seniors.

Why Could HUM Be a Winner?

1. 12.2% annual revenue growth over the last five years surpassed the sector average as its offerings resonated with customers
2. Enormous revenue base of $120.2 billion gives it leverage over plan holders and advantageous reimbursement terms with healthcare providers
3. Projected revenue growth of 6.2% for the next 12 months suggests its momentum from the last two years will persist

Humana’s stock price of $237.37 implies a valuation ratio of 15.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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.

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