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. 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:
Analog Devices (ADI)
Trailing 12-Month Free Cash Flow Margin: 35.4%
Founded by two MIT graduates, Ray Stata and Matthew Lorber in 1965, Analog Devices (NASDAQ: ADI) is one of the largest providers of high performance analog integrated circuits used mainly in industrial end markets, along with communications, autos, and consumer devices.
Why Are We Cautious About ADI?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 10.1% annually over the last two years
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7 percentage points
- Underwhelming 6.5% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $244.95 per share, Analog Devices trades at 29x forward P/E. Read our free research report to see why you should think twice about including ADI in your portfolio.
La-Z-Boy (LZB)
Trailing 12-Month Free Cash Flow Margin: 4.5%
The prized possession of every mancave, La-Z-Boy (NYSE: LZB) is a furniture company specializing in recliners, sofas, and seats.
Why Is LZB Risky?
- Products and services aren't resonating with the market as its revenue declined by 2.8% annually over the last two years
- Anticipated sales growth of 1.9% for the next year implies demand will be shaky
- Diminishing returns on capital suggest its earlier profit pools are drying up
La-Z-Boy is trading at $33.69 per share, or 10.5x forward P/E. If you’re considering LZB for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Snowflake (SNOW)
Trailing 12-Month Free Cash Flow Margin: 17.9%
Named after the unique architecture of its data warehouse which resembles a snowflake pattern, Snowflake (NYSE: SNOW) provides a cloud-based data platform that enables organizations to consolidate, analyze, and share data across multiple cloud providers.
Why Are We Fans of SNOW?
- Billings have averaged 31.2% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Customers use its software daily and increase their spending every year, as seen in its 126% net revenue retention rate
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
Snowflake’s stock price of $220.75 implies a valuation ratio of 14.5x forward price-to-sales. 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
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
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