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 are two cash-producing companies that reinvest wisely to drive long-term success and one that may face some trouble.
One Stock to Sell:
Lindsay (LNN)
Trailing 12-Month Free Cash Flow Margin: 7.2%
A pioneer in the field of center pivot and lateral move irrigation, Lindsay (NYSE: LNN) provides a variety of proprietary water management and road infrastructure products and services.
Why Are We Out on LNN?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
At $113.24 per share, Lindsay trades at 19.2x forward P/E. Dive into our free research report to see why there are better opportunities than LNN.
Two Stocks to Watch:
Dick's (DKS)
Trailing 12-Month Free Cash Flow Margin: 2.1%
Started as a hunting supply store, Dick’s Sporting Goods (NYSE: DKS) is a retailer that sells merchandise for traditional sports as well as for fitness and outdoor activities.
Why Could DKS Be a Winner?
- Fast expansion of new stores to reach markets with few or no locations is justified by its same-store sales growth
- Locations open for at least a year are seeing increased demand as same-store sales have averaged 3.6% growth over the past two years
- Exciting sales outlook for the upcoming 12 months calls for 17.2% growth, an acceleration from its three-year trend
Dick's is trading at $200.87 per share, or 13x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
HNI (HNI)
Trailing 12-Month Free Cash Flow Margin: 2.3%
With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE: HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.
Why Will HNI Outperform?
- Impressive 29.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Projected revenue growth of 39.9% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings growth has comfortably beaten the peer group average over the last five years as its EPS has compounded at 10.7% annually
HNI’s stock price of $47.34 implies a valuation ratio of 10.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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