While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may struggle to keep up.
Two Stocks to Sell:
Amplitude (AMPL)
Trailing 12-Month Free Cash Flow Margin: 3.9%
Born out of a failed voice recognition startup by founder Spenser Skates, Amplitude (NASDAQ: AMPL) is data analytics software helping companies improve and optimize their digital products.
Why Does AMPL Fall Short?
- Products, pricing, or go-to-market strategy may need some adjustments as its 6.4% average billings growth over the last year was weak
- Net revenue retention rate of 97.8% shows it has a tough time retaining customers
- Historical operating losses point to an inefficient cost structure
Amplitude is trading at $8.11 per share, or 3.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than AMPL.
Teradyne (TER)
Trailing 12-Month Free Cash Flow Margin: 16.8%
Sporting most major chip manufacturers as its customers, Teradyne (NASDAQ: TER) is a US-based supplier of automated test equipment for semiconductors as well as other technologies and devices.
Why Are We Cautious About TER?
- Sales tumbled by 5.5% annually over the last two years, showing market trends are working against its favor during this cycle
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 8.7 percentage points
- Free cash flow margin shrank by 5.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $68.01 per share, Teradyne trades at 17x forward price-to-earnings. Read our free research report to see why you should think twice about including TER in your portfolio.
One Stock to Watch:
Republic Services (RSG)
Trailing 12-Month Free Cash Flow Margin: 13.6%
Processing several million tons of recyclables annually, Republic (NYSE: RSG) provides waste management services for residences, companies, and municipalities.
Why Should RSG Be on Your Watchlist?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 9.3% annual sales growth over the last five years
- Highly efficient business model is illustrated by its impressive 18.4% operating margin, and it turbocharged its profits by achieving some fixed cost leverage
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its recently improved profitability means it has even more resources to invest or distribute
Republic Services’s stock price of $246.25 implies a valuation ratio of 35.8x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
