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 reinvests wisely to drive long-term success and two best left off your watchlist.

Two Stocks to Sell:

Photronics (PLAB)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Sporting a global footprint of facilities, Photronics (NASDAQ: PLAB) is a manufacturer of photomasks, templates used to transfer patterns onto semiconductor wafers.

Why Does PLAB Give Us Pause?

1. Projected sales for the next 12 months are flat and suggest demand will be subdued
2. Gross margin of 36.2% is below its competitors, leaving less money to invest in areas like marketing and R&D

Photronics’s stock price of $23.13 implies a valuation ratio of 12.3x forward P/E. Check out our free in-depth research report to learn more about why PLAB doesn’t pass our bar.

Schneider (SNDR)

Trailing 12-Month Free Cash Flow Margin: 5.1%

Employing thousands of drivers across the country to make deliveries, Schneider (NYSE: SNDR) makes full truckload and intermodal deliveries regionally and across borders.

Why Do We Steer Clear of SNDR?

1. Flat sales over the last two years suggest it must find different ways to grow during this cycle
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 10.2% annually
3. Eroding returns on capital suggest its historical profit centers are aging

At $22.37 per share, Schneider trades at 23.5x forward P/E. Dive into our free research report to see why there are better opportunities than SNDR.

One Stock to Watch:

Taboola (TBLA)

Trailing 12-Month Free Cash Flow Margin: 9%

Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ: TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.

Why Do We Like TBLA?

1. Annual revenue growth of 16.3% over the last two years was superb and indicates its market share increased during this cycle
2. Free cash flow margin expanded by 4.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
3. Returns on capital are increasing as management’s prior bets are starting to bear fruit

Taboola is trading at $3.71 per share, or 13.6x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

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