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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one best left off your watchlist.
One Stock to Sell:
Casella Waste Systems (CWST)
Trailing 12-Month Free Cash Flow Margin: 10%
Starting with the founder picking up garbage with a pickup truck he purchased using savings from high school, Casella (NASDAQ: CWST) offers waste management services for businesses, residents, and the government.
Why Do We Think Twice About CWST?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Efficiency has decreased over the last five years as its operating margin fell by 5 percentage points
- ROIC of 6% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $100.40 per share, Casella Waste Systems trades at 81.1x forward P/E. Read our free research report to see why you should think twice about including CWST in your portfolio.
Two Stocks to Watch:
Colgate-Palmolive (CL)
Trailing 12-Month Free Cash Flow Margin: 17.1%
Formed after the 1928 combination between toothpaste maker Colgate and soap maker Palmolive-Peet, Colgate-Palmolive (NYSE: CL) is a consumer products company that focuses on personal, household, and pet products.
Why Could CL Be a Winner?
- Customer loyalty and massive revenue base of $20.1 billion makes it a household name that influences purchasing decisions
- Products command premium prices and lead to a best-in-class gross margin of 60.3%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Colgate-Palmolive’s stock price of $79.19 implies a valuation ratio of 20.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Rollins (ROL)
Trailing 12-Month Free Cash Flow Margin: 18.3%
Operating under multiple brands like Orkin and HomeTeam Pest Defense, Rollins (NYSE: ROL) provides pest and wildlife control services to residential and commercial customers.
Why Will ROL Outperform?
- Impressive 11.5% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Superior product capabilities and pricing power result in a best-in-class gross margin of 52.3%
- Strong free cash flow margin of 16.5% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute
Rollins is trading at $60.02 per share, or 48.2x 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
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% 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.
