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. Keeping that in mind, 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:

Installed Building Products (IBP)

Trailing 12-Month Free Cash Flow Margin: 9.4%

Founded in 1977, Installed Building Products (NYSE: IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.

Why Does IBP Worry Us?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Forecasted revenue decline of 3.1% for the upcoming 12 months implies demand will fall off a cliff
3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 5.3% annually

Installed Building Products’s stock price of $265 implies a valuation ratio of 26.3x forward P/E. Dive into our free research report to see why there are better opportunities than IBP.

Two Stocks to Watch:

Arlo Technologies (ARLO)

Trailing 12-Month Free Cash Flow Margin: 11.2%

Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.

Why Is ARLO Interesting?

1. Operating margin improvement of 13.1 percentage points over the last five years demonstrates its ability to scale efficiently
2. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 434% outpaced its revenue gains
3. Free cash flow margin grew by 17.4 percentage points over the last five years, giving the company more chips to play with

Arlo Technologies is trading at $18.28 per share, or 26.9x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Armstrong World (AWI)

Trailing 12-Month Free Cash Flow Margin: 14%

Started as a two-man shop dating back to the 1860s, Armstrong (NYSE: AWI) provides ceiling and wall products to commercial and residential spaces.

Why Is AWI a Top Pick?

1. Annual revenue growth of 11.1% over the last two years was superb and indicates its market share increased during this cycle
2. Excellent operating margin of 24.7% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage
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 $194.13 per share, Armstrong World trades at 26.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. 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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