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.
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 that may struggle to keep up.
Two Stocks to Sell:
CarMax (KMX)
Trailing 12-Month Free Cash Flow Margin: 2%
Known for its transparent, customer-centric approach and wide selection of vehicles, Carmax (NYSE: KMX) is the largest automotive retailer in the United States.
Why Do We Avoid KMX?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 10.8% that must be offset through higher volumes
CarMax is trading at $58.58 per share, or 14.9x forward P/E. Read our free research report to see why you should think twice about including KMX in your portfolio.
Landstar (LSTR)
Trailing 12-Month Free Cash Flow Margin: 3.8%
Covering billions of miles throughout North America, Landstar (NASDAQ: LSTR) is a transportation company specializing in freight and last-mile delivery services.
Why Should You Dump LSTR?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 12.7% annually over the last two years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
At $128.75 per share, Landstar trades at 23.2x forward P/E. Dive into our free research report to see why there are better opportunities than LSTR.
One Stock to Watch:
Commvault (CVLT)
Trailing 12-Month Free Cash Flow Margin: 18%
Born from the need to create ironclad protection in an increasingly dangerous digital world, Commvault (NASDAQ: CVLT) provides data protection and cyber resilience software that helps organizations secure, back up, and recover their data across on-premises, hybrid, and multi-cloud environments.
Why Are We Positive On CVLT?
- Billings have averaged 26.5% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Software is difficult to replicate at scale and results in a premier gross margin of 82%
- Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 7.6%
Commvault’s stock price of $179.78 implies a valuation ratio of 6.8x forward price-to-sales. Is now the right time to buy? See for yourself 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 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
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