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 struggle to keep up.

Two Software Stocks to Sell:

Bandwidth (BAND)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ: BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.

Why Are We Out on BAND?

1. Revenue increased by 13.1% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
2. Estimated sales growth of 4.6% for the next 12 months implies demand will slow from its three-year trend
3. Sky-high servicing costs result in an inferior gross margin of 38.6% that must be offset through increased usage

At $15 per share, Bandwidth trades at 0.6x forward price-to-sales. To fully understand why you should be careful with BAND, check out our full research report (it’s free).

Marqeta (MQ)

Trailing 12-Month Free Cash Flow Margin: 9.6%

Powering the cards behind innovative fintech services like Block's Cash App, Marqeta (NASDAQ: MQ) provides a cloud-based platform that allows businesses to create customized payment card programs and process card transactions.

Why Are We Cautious About MQ?

1. Sales tumbled by 4.7% annually over the last three years, showing industry trends like AI are working against its favor
2. Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

Marqeta is trading at $6.32 per share, or 4.4x forward price-to-sales. Read our free research report to see why you should think twice about including MQ in your portfolio.

One Software Stock to Watch:

Freshworks (FRSH)

Trailing 12-Month Free Cash Flow Margin: 24.5%

Starting as a customer service solution before expanding into a comprehensive software suite, Freshworks (NASDAQ: FRSH) provides AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales, and marketing functions.

Why Could FRSH Be a Winner?

1. ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
2. Prominent and differentiated software culminates in a stellar gross margin of 84.6%
3. Operating margin improvement of 13.2 percentage points over the last year demonstrates its ability to scale efficiently

Freshworks’s stock price of $13.60 implies a valuation ratio of 4.6x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound 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-small-cap company Exlservice (+354% 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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