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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.
Two Stocks to Sell:
Sonos (SONO)
Trailing 12-Month Free Cash Flow Margin: 4%
A pioneer in connected home audio systems, Sonos (NASDAQ: SONO) offers a range of premium wireless speakers and sound systems.
Why Should You Sell SONO?
- Products and services aren't resonating with the market as its revenue declined by 8% annually over the last two years
- Poor expense management has led to operating margin losses
- Push for growth has led to negative returns on capital, signaling value destruction
Sonos is trading at $16.32 per share, or 22.7x forward P/E. If you’re considering SONO for your portfolio, see our FREE research report to learn more.
Compass (COMP)
Trailing 12-Month Free Cash Flow Margin: 2.3%
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE: COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Are We Hesitant About COMP?
- Sluggish trends in its principal agents suggest customers aren’t adopting its solutions as quickly as the company hoped
- Historical operating margin losses point to an inefficient cost structure
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Compass’s stock price of $7.62 implies a valuation ratio of 15.3x forward P/E. Dive into our free research report to see why there are better opportunities than COMP.
One Stock to Watch:
Core & Main (CNM)
Trailing 12-Month Free Cash Flow Margin: 7.3%
Formerly a division of industrial distributor HD Supply, Core & Main (NYSE: CNM) is a provider of water, wastewater, and fire protection products and services.
Why Does CNM Stand Out?
- Market share has increased this cycle as its 17.3% annual revenue growth over the last five years was exceptional
- Share repurchases over the last two years enabled its annual earnings per share growth of 20.5% to outpace its revenue gains
- Free cash flow margin jumped by 7.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $52.60 per share, Core & Main trades at 22.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 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-small-cap company Exlservice (+354% 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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