A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.

Two Stocks to Sell:

Dayforce (DAY)

Trailing 12-Month Free Cash Flow Margin: 11.6%

Founded in 1992 as Ceridian, an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Dayforce (NYSE: DAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.

Why Does DAY Worry Us?

1. Sales trends were unexciting over the last three years as its 18.7% annual growth was below the typical software company
2. Gross margin of 50.3% is way below its competitors, leaving less money to invest in areas like marketing and R&D
3. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 3.4 percentage points

At $59.08 per share, Dayforce trades at 4.8x forward price-to-sales. Read our free research report to see why you should think twice about including DAY in your portfolio.

Danaher (DHR)

Trailing 12-Month Free Cash Flow Margin: 20.6%

Born from a real estate investment trust that transformed into a manufacturing powerhouse, Danaher (NYSE: DHR) is a global science and technology company that provides specialized equipment, software, and services for biotechnology, life sciences, and diagnostics.

Why Do We Think Twice About DHR?

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. Adjusted operating margin declined by 4.3 percentage points over the last two years as its sales cratered
3. Free cash flow margin dropped by 6.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Danaher’s stock price of $190.50 implies a valuation ratio of 24x forward P/E. Dive into our free research report to see why there are better opportunities than DHR.

One Stock to Watch:

KBR (KBR)

Trailing 12-Month Free Cash Flow Margin: 5.1%

Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.

Why Does KBR Stand Out?

1. 10.3% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers
2. Operating margin expanded by 4.9 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 15.8%, which outperformed its revenue gains over the last five years

KBR is trading at $52.19 per share, or 13.5x 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

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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).

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