1 Cash-Producing Stock with Competitive Advantages and 2 We Brush Off

October 14, 2025 at 00:39 AM EDT

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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.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may face some trouble.

Two Stocks to Sell:

Chemed (CHE)

Trailing 12-Month Free Cash Flow Margin: 14.8%

With a unique business model combining end-of-life care and household services, Chemed (NYSE: CHE) operates two distinct businesses: VITAS, which provides hospice care for terminally ill patients, and Roto-Rooter, which offers plumbing and water restoration services.

Why Do We Think Twice About CHE?

4.4% annual revenue growth over the last five years was slower than its healthcare peers
Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 2.7 percentage points
Diminishing returns on capital suggest its earlier profit pools are drying up

Chemed is trading at $430 per share, or 18x forward P/E. Read our free research report to see why you should think twice about including CHE in your portfolio.

Quest (DGX)

Trailing 12-Month Free Cash Flow Margin: 11.6%

Processing approximately one-third of the adult U.S. population's lab tests annually, Quest Diagnostics (NYSE: DGX) provides laboratory testing and diagnostic information services to patients, physicians, hospitals, and other healthcare providers across the United States.

Why Does DGX Give Us Pause?

Sizable revenue base leads to growth challenges as its 5.3% annual revenue increases over the last two years fell short of other healthcare companies
Efficiency has decreased over the last five years as its adjusted operating margin fell by 11.1 percentage points
Eroding returns on capital suggest its historical profit centers are aging

At $182.82 per share, Quest trades at 18.3x forward P/E. If you’re considering DGX for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

RBC Bearings (RBC)

Trailing 12-Month Free Cash Flow Margin: 15.6%

With a Guinness World Record for engineering the largest spherical plain bearing, RBC Bearings (NYSE: RBC) is a manufacturer of bearings and related components for the aerospace & defense, industrial, and transportation industries.

Why Does RBC Catch Our Eye?

Annual revenue growth of 18.9% over the last five years was superb and indicates its market share increased during this cycle
Market share is on track to rise over the next 12 months as its 14.5% projected revenue growth implies demand will accelerate from its two-year trend
Disciplined cost controls and effective management resulted in a strong long-term operating margin of 20.2%, and it turbocharged its profits by achieving some fixed cost leverage

RBC Bearings’s stock price of $380.76 implies a valuation ratio of 31.9x forward P/E. Is now the time to initiate a position? 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-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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