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 best left off your watchlist.
Two Stocks to Sell:
PVH (PVH)
Trailing 12-Month Free Cash Flow Margin: 5.9%
Founded in 1881 by a husband and wife duo, PVH (NYSE: PVH) is a global fashion conglomerate with iconic brands like Calvin Klein and Tommy Hilfiger.
Why Do We Steer Clear of PVH?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.5%
- ROIC of 1.3% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
PVH’s stock price of $76.53 implies a valuation ratio of 6.8x forward P/E. To fully understand why you should be careful with PVH, check out our full research report (it’s free for active Edge members).
LifeStance Health Group (LFST)
Trailing 12-Month Free Cash Flow Margin: 8.7%
With over 6,600 licensed mental health professionals treating more than 880,000 patients annually, LifeStance Health (NASDAQ: LFST) provides outpatient mental health services through a network of clinicians offering psychiatric evaluations, psychological testing, and therapy across 33 states.
Why Does LFST Fall Short?
- Modest revenue base of $1.37 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Poor free cash flow margin of -0.5% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Negative returns on capital show management lost money while trying to expand the business
LifeStance Health Group is trading at $6.43 per share, or 28.8x forward P/E. Read our free research report to see why you should think twice about including LFST in your portfolio.
One Stock to Watch:
Montrose (MEG)
Trailing 12-Month Free Cash Flow Margin: 9%
Founded to protect a tree-lined two-lane road, Montrose (NYSE: MEG) provides air quality monitoring, environmental laboratory testing, compliance, and environmental consulting services.
Why Could MEG Be a Winner?
- Impressive 17.6% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Earnings per share have massively outperformed its peers over the last two years, increasing by 109% annually
- Free cash flow margin jumped by 6.6 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $24.70 per share, Montrose trades at 21.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
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 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-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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
