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. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one best left off your watchlist.

One Stock to Sell:

Enphase (ENPH)

Trailing 12-Month Free Cash Flow Margin: 33.2%

The first company to successfully commercialize the solar micro-inverter, Enphase (NASDAQ: ENPH) manufactures software-driven home energy products.

Why Is ENPH Not Exciting?

1. Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
2. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 13.6 percentage points
3. Earnings per share have dipped by 27.9% annually over the past two years, which is concerning because stock prices follow EPS over the long term

Enphase’s stock price of $41.80 implies a valuation ratio of 12.5x forward P/E. Read our free research report to see why you should think twice about including ENPH in your portfolio.

Two Stocks to Watch:

Costco (COST)

Trailing 12-Month Free Cash Flow Margin: 2.7%

Designed to be a one-stop shop for the suburban consumer, Costco (NASDAQ: COST) is a membership-only retail chain that sells groceries, apparel, toys, and household items, often in bulk quantities.

Why Are We Backing COST?

1. Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 5% over the past two years
2. Dominant market position is represented by its $268.8 billion in revenue, which compensates for its subpar gross margin
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

Costco is trading at $970.08 per share, or 50x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Core & Main (CNM)

Trailing 12-Month Free Cash Flow Margin: 7.6%

Formerly a division of industrial distributor HD Supply, Core & Main (NYSE: CNM) is a provider of water, wastewater, and fire protection products and services.

Why Could CNM Be a Winner?

1. Annual revenue growth of 17.1% over the past five years was outstanding, reflecting market share gains this cycle
2. Operating margin expanded by 3.8 percentage points over the last five years as it scaled and became more efficient
3. Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue

At $61.58 per share, Core & Main trades at 24.8x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 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 Tecnoglass (+1,754% 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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