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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. 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 Software Stocks to Sell:
Akamai Technologies (AKAM)
Trailing 12-Month Free Cash Flow Margin: 16.6%
With a massive distributed network spanning 4,100+ points of presence in nearly 130 countries, Akamai Technologies (NASDAQ: AKAM) provides a global distributed cloud platform that helps businesses deliver, secure, and optimize their digital experiences online.
Why Do We Steer Clear of AKAM?
- Sales trends were unexciting over the last three years as its 4.6% annual growth was well below the typical software company
- Gross margin of 59.1% reflects its high servicing costs
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
Akamai Technologies’s stock price of $76.95 implies a valuation ratio of 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why AKAM doesn’t pass our bar.
Paylocity (PCTY)
Trailing 12-Month Free Cash Flow Margin: 21.5%
Operating in a field where companies traditionally juggled multiple disconnected systems, Paylocity (NASDAQ: PCTY) provides cloud-based human capital management and payroll software solutions that help businesses manage their workforce and HR processes.
Why Is PCTY Not Exciting?
- Estimated sales growth of 7.6% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 68.9% reflects its relatively high servicing costs
At $175.55 per share, Paylocity trades at 5.8x forward price-to-sales. To fully understand why you should be careful with PCTY, check out our full research report (it’s free).
One Software Stock to Buy:
monday.com (MNDY)
Trailing 12-Month Free Cash Flow Margin: 29.9%
With its colorful interface of boards, columns, and automation that replaced the chaos of spreadsheets, monday.com (NASDAQ: MNDY) is a cloud-based work operating system that helps teams manage projects, track tasks, and streamline workflows through customizable interfaces.
Why Is MNDY a Top Pick?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Superior software functionality and low servicing costs result in a best-in-class gross margin of 89.4%
- Strong free cash flow margin of 29.9% enables it to reinvest or return capital consistently
monday.com is trading at $182.01 per share, or 7.1x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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 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-micro-cap company Kadant (+351% 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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