While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.

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 leverage their financial strength to beat the competition and one that may struggle to keep up.

One Stock to Sell:

Driven Brands (DRVN)

Trailing 12-Month Free Cash Flow Margin: 1.7%

With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ: DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.

Why Does DRVN Worry Us?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $17.39 per share, Driven Brands trades at 12.3x forward P/E. To fully understand why you should be careful with DRVN, check out our full research report (it’s free).

Two Stocks to Buy:

AppLovin (APP)

Trailing 12-Month Free Cash Flow Margin: 53.7%

Sitting at the crossroads of the mobile advertising ecosystem with over 200 free-to-play games in its portfolio, AppLovin (NASDAQ: APP) provides software solutions that help mobile app developers market, monetize, and grow their apps through AI-powered advertising and analytics tools.

Why Will APP Outperform?

1. Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
2. Healthy operating margin of 52% shows it’s a well-run company with efficient processes, and its rise over the last year was fueled by some leverage on its fixed costs
3. Robust free cash flow margin of 53.7% gives it many options for capital deployment

AppLovin is trading at $609.99 per share, or 33x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

AutoZone (AZO)

Trailing 12-Month Free Cash Flow Margin: 10.6%

Aiming to be a one-stop shop for the DIY customer, AutoZone (NYSE: AZO) is an auto parts and accessories retailer that sells everything from car batteries to windshield wiper fluid to brake pads.

Why Is AZO a Top Pick?

1. Store expansion strategy is justified by its healthy same-store sales
2. Differentiated product assortment is reflected in its best-in-class gross margin of 51.8%
3. AZO is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

AutoZone’s stock price of $4,237 implies a valuation ratio of 25.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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 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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