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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, 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:
NXP Semiconductors (NXPI)
Trailing 12-Month Free Cash Flow Margin: 19.7%
Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.
Why Is NXPI Not Exciting?
- Annual sales declines of 3.9% for the past two years show its products and services struggled to connect with the market during this cycle
- Anticipated sales growth of 10.6% for the next year implies demand will be shaky
NXP Semiconductors’s stock price of $195.43 implies a valuation ratio of 14.1x forward P/E. Dive into our free research report to see why there are better opportunities than NXPI.
United Natural Foods (UNFI)
Trailing 12-Month Free Cash Flow Margin: 1.2%
With a vast network of 55 distribution centers spanning approximately 30 million square feet of warehouse space, United Natural Foods (NYSE: UNFI) is North America's premier grocery wholesaler distributing natural, organic, and conventional products to over 30,000 retail locations across the US and Canada.
Why Are We Out on UNFI?
- Annual sales growth of 1.8% over the last three years lagged behind its consumer staples peers as its large revenue base made it difficult to generate incremental demand
- Earnings per share fell by 29.3% annually over the last three years while its revenue grew, showing its incremental sales were much less profitable
- High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate
United Natural Foods is trading at $44.82 per share, or 15.6x forward P/E. Check out our free in-depth research report to learn more about why UNFI doesn’t pass our bar.
One Stock to Watch:
e.l.f. Beauty (ELF)
Trailing 12-Month Free Cash Flow Margin: 14.1%
Short for "eyes, lips, face", e.l.f. Beauty (NYSE: ELF) is a developer of high-quality beauty products at accessible price points.
Why Do We Like ELF?
- Annual revenue growth of 45.2% over the last three years was superb and indicates its market share is rising
- Earnings per share grew by 38.2% annually over the last three years, massively outpacing its peers
- Free cash flow margin increased by 12.2 percentage points over the last year, giving the company more capital to invest or return to shareholders
At $62.45 per share, e.l.f. Beauty trades at 18.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
