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. Keeping that in mind, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may face some trouble.
Two Stocks to Sell:
Douglas Dynamics (PLOW)
Trailing 12-Month Free Cash Flow Margin: 6.4%
Once manufacturing snowplows designed for the iconic jeep vehicle precursor, Douglas Dynamics (NYSE: PLOW) offers snow and ice equipment for the roads and sidewalks.
Why Do We Think PLOW Will Underperform?
- Annual sales declines of 2.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Efficiency has decreased over the last five years as its operating margin fell by 3.8 percentage points
- 4.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $31.15 per share, Douglas Dynamics trades at 14.3x forward P/E. Check out our free in-depth research report to learn more about why PLOW doesn’t pass our bar.
Enphase (ENPH)
Trailing 12-Month Free Cash Flow Margin: 25.2%
The first company to successfully commercialize the solar micro-inverter, Enphase (NASDAQ: ENPH) manufactures software-driven home energy products.
Why Do We Think Twice About ENPH?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 12 percentage points
- Earnings per share have dipped by 27.3% annually over the past two years, which is concerning because stock prices follow EPS over the long term
Enphase’s stock price of $36.15 implies a valuation ratio of 14.5x forward P/E. Read our free research report to see why you should think twice about including ENPH in your portfolio.
One Stock to Buy:
O'Reilly (ORLY)
Trailing 12-Month Free Cash Flow Margin: 10.1%
Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ: ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.
Why Are We Bullish on ORLY?
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3.9% over the past two years
- Unique assortment of products and pricing power result in a best-in-class gross margin of 51.3%
- Robust free cash flow margin of 11.1% gives it many options for capital deployment
O'Reilly is trading at $107.60 per share, or 34.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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 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
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