A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, 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:

Leggett & Platt (LEG)

Trailing 12-Month Free Cash Flow Margin: 5.8%

Founded in 1883, Leggett & Platt (NYSE: LEG) is a diversified manufacturer of products and components for various industries.

Why Do We Steer Clear of LEG?

1. Sales were flat over the last five years, indicating it’s failed to expand its business
2. Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 11.8% annually
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $9.37 per share, Leggett & Platt trades at 8.1x forward P/E. To fully understand why you should be careful with LEG, check out our full research report (it’s free).

Choice Hotels (CHH)

Trailing 12-Month Free Cash Flow Margin: 10.5%

With almost 100% of its properties under franchise agreements, Choice Hotels (NYSE: CHH) is a hotel franchisor known for its diverse brand portfolio including Comfort Inn, Quality Inn, and Clarion.

Why Do We Pass on CHH?

1. Weak revenue per room over the past two years indicates challenges in maintaining pricing power and occupancy rates
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Choice Hotels’s stock price of $121.98 implies a valuation ratio of 17.1x forward P/E. If you’re considering CHH for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Xylem (XYL)

Trailing 12-Month Free Cash Flow Margin: 10.1%

Formed through a spinoff, Xylem (NYSE: XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.

Why Are We Positive On XYL?

1. Impressive 20.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Offerings are difficult to replicate at scale and result in a premier gross margin of 37.6%
3. Earnings per share have massively outperformed its peers over the last two years, increasing by 15.9% annually

Xylem is trading at $140 per share, or 29.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

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).

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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