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 are two cash-producing companies that reinvest wisely to drive long-term success and one that may face some trouble.

One Stock to Sell:

Crane NXT (CXT)

Trailing 12-Month Free Cash Flow Margin: 10.5%

Born from a corporate transformation completed in 2023, Crane NXT (NYSE: CXT) provides specialized technology solutions for payment processing, banknote security, and authentication systems for financial institutions and businesses.

Why Is CXT Not Exciting?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Revenue base of $1.50 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
3. Earnings per share have contracted by 2.2% annually over the last one years, a headwind for returns as stock prices often echo long-term EPS performance

Crane NXT is trading at $59.30 per share, or 13.5x forward P/E. Check out our free in-depth research report to learn more about why CXT doesn’t pass our bar.

Two Stocks to Watch:

LegalZoom (LZ)

Trailing 12-Month Free Cash Flow Margin: 16.9%

Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.

Why Do We Like LZ?

1. Subscription Units have increased by an average of 10.5% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
2. Share buybacks catapulted its annual earnings per share growth to 289%, which outperformed its revenue gains over the last three years
3. Free cash flow margin expanded by 13.1 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends

At $9.17 per share, LegalZoom trades at 9.7x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.

Verra Mobility (VRRM)

Trailing 12-Month Free Cash Flow Margin: 19.5%

Aiming to wrap technology and data around a historically manual and paper-based industry, Verra Mobility (NYSE: VRRM) is a leading provider of smart mobility technology to address tolls and violations, title and registration services, as well as safety and traffic enforcement.

Why Is VRRM a Good Business?

1. Market share has increased this cycle as its 13.8% annual revenue growth over the last five years was exceptional
2. Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 62.1%
3. VRRM is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business

Verra Mobility’s stock price of $25.40 implies a valuation ratio of 18.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. 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 Comfort Systems (+782% 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

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.