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.

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:

Microchip Technology (MCHP)

Trailing 12-Month Free Cash Flow Margin: 17.1%

Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.

Why Do We Pass on MCHP?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.2% annually over the last five years
2. Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
3. 15.8 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Microchip Technology is trading at $64.45 per share, or 37.2x forward P/E. To fully understand why you should be careful with MCHP, check out our full research report (it’s free).

Envista (NVST)

Trailing 12-Month Free Cash Flow Margin: 10.1%

Uniting more than 30 trusted brands including Nobel Biocare, Ormco, and DEXIS under one corporate umbrella, Envista Holdings (NYSE: NVST) is a global dental products company that provides equipment, consumables, and specialized technologies for dental professionals.

Why Do We Think NVST Will Underperform?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share
2. Negative returns on capital show that some of its growth strategies have backfired, and its falling returns suggest its earlier profit pools are drying up
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Envista’s stock price of $20.78 implies a valuation ratio of 18.5x forward P/E. Dive into our free research report to see why there are better opportunities than NVST.

One Stock to Watch:

Euronet Worldwide (EEFT)

Trailing 12-Month Free Cash Flow Margin: 14.2%

Operating a global network of over 47,000 ATMs and 821,000 point-of-sale terminals across more than 60 countries, Euronet Worldwide (NASDAQ: EEFT) provides electronic payment solutions including ATM services, prepaid product processing, and international money transfer services.

Why Could EEFT Be a Winner?

1. Decent 9.8% annual revenue growth over the last five years beat most of its peers, showing customers find value in its products and services
2. Share repurchases over the last two years enabled its annual earnings per share growth of 11.9% to outpace its revenue gains
3. ROE punches in at 18.2%, illustrating management’s expertise in identifying profitable investments

At $92 per share, Euronet Worldwide trades at 8.6x forward P/E. Is now a good time to buy? Find out in our full 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 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 Comfort Systems (+782% 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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