1 Cash-Producing Stock with Solid Fundamentals and 2 We Ignore

September 25, 2025 at 00:39 AM EDT

KRT Cover Image

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

Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two that may struggle to keep up.

Two Stocks to Sell:

Karat Packaging (KRT)

Trailing 12-Month Free Cash Flow Margin: 9.8%

Founded as Lollicup, Karat Packaging (NASDAQ: KRT) distributes and manufactures environmentally-friendly disposable foodservice packaging solutions.

Why Are We Hesitant About KRT?

4.2% annual revenue growth over the last two years was slower than its industrials peers
Revenue growth over the past two years was nullified by the company’s new share issuances as its earnings per share fell by 2.9% annually
Low free cash flow margin of 5.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Karat Packaging is trading at $24.49 per share, or 16.5x forward P/E. If you’re considering KRT for your portfolio, see our FREE research report to learn more.

Baxter (BAX)

Trailing 12-Month Free Cash Flow Margin: 3.2%

With a history dating back to 1931 and products used in over 100 countries, Baxter International (NYSE: BAX) provides essential healthcare products including dialysis therapies, IV solutions, infusion systems, surgical products, and patient monitoring technologies to hospitals and clinics worldwide.

Why Should You Dump BAX?

Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.2% annually over the last two years
Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
Earnings per share fell by 3% annually over the last five years while its revenue was flat, showing each sale was less profitable

Baxter’s stock price of $22.57 implies a valuation ratio of 8.7x forward P/E. Dive into our free research report to see why there are better opportunities than BAX.

One Stock to Watch:

Lennox (LII)

Trailing 12-Month Free Cash Flow Margin: 12.6%

Based in Texas and founded over a century ago, Lennox (NYSE: LII) is a climate control solutions company offering heating, ventilation, air conditioning, and refrigeration (HVACR) goods.

Why Are We Fans of LII?

Disciplined cost controls and effective management resulted in a strong long-term operating margin of 16.4%, and its operating leverage amplified its profits over the last five years
Earnings per share grew by 22.2% annually over the last two years and trumped its peers
Industry-leading 52.3% return on capital demonstrates management’s skill in finding high-return investments

At $522.44 per share, Lennox trades at 21.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

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