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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
Estée Lauder (EL)
Trailing 12-Month Free Cash Flow Margin: 6.4%
Named after its founder, who was an entrepreneurial woman from New York with a passion for skincare, Estée Lauder (NYSE: EL) is a one-stop beauty shop with products in skincare, fragrance, makeup, sun protection, and men’s grooming.
Why Is EL Risky?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs
- Sales were less profitable over the last three years as its earnings per share fell by 35.3% annually, worse than its revenue declines
Estée Lauder’s stock price of $69.57 implies a valuation ratio of 32x forward P/E. If you’re considering EL for your portfolio, see our FREE research report to learn more.
Envista (NVST)
Trailing 12-Month Free Cash Flow Margin: 10.7%
Uniting more than 30 trusted brands including Nobel Biocare, Ormco, and DEXIS under one corporate umbrella, Envista Holdings (NYSE: NVST) is a global dental products company that provides equipment, consumables, and specialized technologies for dental professionals.
Why Do We Think NVST Will Underperform?
- 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 13.9% annually over the last five years while its revenue was flat, showing each sale was less profitable
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Envista is trading at $19.23 per share, or 18.8x forward P/E. Dive into our free research report to see why there are better opportunities than NVST.
One Stock to Buy:
GitLab (GTLB)
Trailing 12-Month Free Cash Flow Margin: 23.2%
Founded as an open-source project in 2011, GitLab (NASDAQ: GTLB) is a leading software development tools platform.
Why Is GTLB a Top Pick?
- Ability to secure long-term commitments with customers is evident in its 32.8% ARR growth over the last year
- Software is difficult to replicate at scale and results in a best-in-class gross margin of 88.6%
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
At $43.59 per share, GitLab trades at 7.2x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum 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-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.
