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 are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
Columbia Sportswear (COLM)
Trailing 12-Month Free Cash Flow Margin: 7.5%
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ: COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Should You Dump COLM?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $54.40 per share, Columbia Sportswear trades at 17x forward P/E. Dive into our free research report to see why there are better opportunities than COLM.
Two Stocks to Watch:
Ulta (ULTA)
Trailing 12-Month Free Cash Flow Margin: 8.2%
Offering high-end prestige brands as well as lower-priced, mass-market ones, Ulta Beauty (NASDAQ: ULTA) is an American retailer that sells makeup, skincare, haircare, and fragrance products.
Why Are We Positive On ULTA?
- Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
- ULTA is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
- Industry-leading 32.1% return on capital demonstrates management’s skill in finding high-return investments
Ulta’s stock price of $536.95 implies a valuation ratio of 21.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
ITT (ITT)
Trailing 12-Month Free Cash Flow Margin: 13.2%
Playing a crucial role in the development of the first transatlantic television transmission in 1956, ITT (NYSE: ITT) provides motion and fluid handling equipment for various industries
Why Do We Like ITT?
- Healthy operating margin of 16.4% shows it’s a well-run company with efficient processes, and its operating leverage amplified its profits over the last five years
- Free cash flow margin expanded by 15.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- ROIC punches in at 18.6%, illustrating management’s expertise in identifying profitable investments
ITT is trading at $182.88 per share, or 27x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 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 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).
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