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. Keeping that in mind, here are two cash-producing companies that reinvest wisely to drive long-term success and one best left off your watchlist.
One Stock to Sell:
BILL (BILL)
Trailing 12-Month Free Cash Flow Margin: 21.4%
Transforming the messy back-office financial operations that plague small business owners, BILL (NYSE: BILL) provides a cloud-based platform that automates accounts payable, accounts receivable, and expense management for small and midsize businesses.
Why Do We Think BILL Will Underperform?
- Products, pricing, or go-to-market strategy may need some adjustments as its 11.7% average billings growth over the last year was weak
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Operating margin was unchanged over the last year, suggesting it failed to gain leverage on its fixed costs
BILL is trading at $39.41 per share, or 2.1x forward price-to-sales. Check out our free in-depth research report to learn more about why BILL doesn’t pass our bar.
Two Stocks to Watch:
Limbach (LMB)
Trailing 12-Month Free Cash Flow Margin: 6.5%
Established in 1901, Limbach (NASDAQ: LMB) provides integrated building systems solutions, including mechanical, electrical, and plumbing services.
Why Are We Bullish on LMB?
- Annual revenue growth of 11.9% over the last two years was superb and indicates its market share increased during this cycle
- Additional sales over the last two years increased its profitability as the 46.5% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin jumped by 11.6 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Limbach’s stock price of $89.16 implies a valuation ratio of 19.5x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
JBT Marel (JBTM)
Trailing 12-Month Free Cash Flow Margin: 6.6%
Tracing back to its invention of the mechanical milk bottle filler in 1884, JBT Marel (NYSE: JBTM) designs, manufactures, and sells equipment used for food processing and aviation.
Why Do We Like JBTM?
- Market share has increased this cycle as its 51.1% annual revenue growth over the last two years was exceptional
- Solid gross margin and unit economics free up capital for marketing and product development efforts
- Earnings per share have massively outperformed its peers over the last two years, increasing by 20.1% annually
At $130.09 per share, JBT Marel trades at 15.9x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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