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. That said, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may face some trouble.

One Stock to Sell:

John Bean (JBTM)

Trailing 12-Month Free Cash Flow Margin: 10.8%

Tracing back to its invention of the mechanical milk bottle filler in 1884, John Bean (NYSE: JBT) designs, manufactures, and sells equipment used for food processing and aviation.

Why Do We Think Twice About JBTM?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 6.1 percentage points
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $140.33 per share, John Bean trades at 20.9x forward P/E. Dive into our free research report to see why there are better opportunities than JBTM.

Two Stocks to Watch:

Wingstop (WING)

Trailing 12-Month Free Cash Flow Margin: 8.3%

The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.

Why Is WING a Good Business?

1. Aggressive strategy of rolling out new restaurants to gobble up whitespace is prudent given its same-store sales growth
2. Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 14.6% over the past two years
3. Healthy operating margin of 25.5% shows it’s a well-run company with efficient processes

Wingstop is trading at $327 per share, or 75.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Leidos (LDOS)

Trailing 12-Month Free Cash Flow Margin: 7.9%

Formed through the split of IT services company SAIC, Leidos (NYSE: LDOS) offers technology and engineering solutions such as military training systems for the defense, civil, and health markets.

Why Does LDOS Stand Out?

1. Sales pipeline is in good shape as its backlog averaged 15.7% growth over the past two years
2. Operating margin expanded by 3.4 percentage points over the last five years as it scaled and became more efficient
3. Share buybacks catapulted its annual earnings per share growth to 31%, which outperformed its revenue gains over the last two years

Leidos’s stock price of $178.70 implies a valuation ratio of 16.2x 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

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