A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
Torrid (CURV)
Trailing 12-Month Free Cash Flow Margin: 2%
Promoting a message of body positivity and inclusiveness, Torrid Holdings (NYSE: CURV) is a plus-size women’s apparel and accessories retailer.
Why Do We Think CURV Will Underperform?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Estimated sales decline of 6.1% for the next 12 months implies a challenging demand environment
- Earnings per share have contracted by 52.4% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Torrid’s stock price of $5.06 implies a valuation ratio of 39.6x forward P/E. Check out our free in-depth research report to learn more about why CURV doesn’t pass our bar.
Two Stocks to Buy:
Datadog (DDOG)
Trailing 12-Month Free Cash Flow Margin: 29.4%
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ: DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.
Why Will DDOG Beat the Market?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Robust free cash flow margin of 29.4% gives it many options for capital deployment
At $121.49 per share, Datadog trades at 13.2x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
AZEK (AZEK)
Trailing 12-Month Free Cash Flow Margin: 13.7%
With a significant portion of its products made from recycled materials, AZEK (NYSE: AZEK) designs and manufactures goods for outdoor living spaces.
Why Should You Buy AZEK?
- Average organic revenue growth of 12.5% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Share buybacks catapulted its annual earnings per share growth to 56.9%, which outperformed its revenue gains over the last two years
- Free cash flow margin jumped by 8.8 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
AZEK is trading at $52.97 per share, or 34.7x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. 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
