1 Cash-Producing Stock with Impressive Fundamentals and 2 That Underwhelm

September 26, 2025 at 00:40 AM EDT

ELF Cover Image

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.

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 best left off your watchlist.

Two Stocks to Sell:

BrightSpring Health Services (BTSG)

Trailing 12-Month Free Cash Flow Margin: 1.6%

Founded in 1974, BrightSpring Health Services (NASDAQ: BTSG) offers home health care, hospice, neuro-rehabilitation, and pharmacy services.

Why Are We Wary of BTSG?

Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 2.4 percentage points
Earnings per share have dipped by 49.3% annually over the past four years, which is concerning because stock prices follow EPS over the long term
Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.3 percentage points

BrightSpring Health Services is trading at $26.90 per share, or 27.4x forward P/E. To fully understand why you should be careful with BTSG, check out our full research report (it’s free).

EPAM (EPAM)

Trailing 12-Month Free Cash Flow Margin: 8.1%

Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE: EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.

Why Are We Cautious About EPAM?

Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
Eroding returns on capital suggest its historical profit centers are aging

At $151.93 per share, EPAM trades at 13.1x forward P/E. Read our free research report to see why you should think twice about including EPAM in your portfolio.

One Stock to Buy:

e.l.f. Beauty (ELF)

Trailing 12-Month Free Cash Flow Margin: 10.1%

Short for "eyes, lips, face", e.l.f. Beauty (NYSE: ELF) is a developer of high-quality beauty products at accessible price points.

Why Are We Bullish on ELF?

Annual revenue growth of 47.6% over the past three years was outstanding, reflecting market share gains
Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 48.6% annually
Free cash flow margin jumped by 6.5 percentage points over the last year, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

e.l.f. Beauty’s stock price of $130.69 implies a valuation ratio of 33.5x 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

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. 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 Kadant (+351% 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

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

About Us

Additional Information

Website & Technical Help