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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, 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:
Graco (GGG)
Trailing 12-Month Free Cash Flow Margin: 28.1%
Founded in 1926, Graco (NYSE: GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.
Why Are We Hesitant About GGG?
- Annual revenue growth of 2.1% over the last two years was below our standards for the industrials sector
- Earnings per share were flat over the last two years and fell short of the peer group average
- Diminishing returns on capital suggest its earlier profit pools are drying up
Graco’s stock price of $78.78 implies a valuation ratio of 25.2x forward P/E. To fully understand why you should be careful with GGG, check out our full research report (it’s free).
Two Stocks to Watch:
MediaAlpha (MAX)
Trailing 12-Month Free Cash Flow Margin: 3.5%
Powering nearly 10 million consumer referrals each month in the insurance marketplace, MediaAlpha (NYSE: MAX) operates a technology platform that connects insurance carriers with high-intent consumers shopping for property, casualty, health, and life insurance products.
Why Are We Fans of MAX?
- Annual revenue growth of 69.6% over the last two years was superb and indicates its market share increased during this cycle
- Estimated revenue growth of 10.8% for the next 12 months implies its momentum over the last two years will continue
- Earnings per share have massively outperformed its peers over the last two years, increasing by 410% annually
At $9.10 per share, MediaAlpha trades at 6.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Vitesse Energy (VTS)
Trailing 12-Month Free Cash Flow Margin: 23.9%
Taking a hands-off approach to energy production, Vitesse Energy (NYSE: VTS) owns non-operated stakes in oil and natural gas wells primarily in North Dakota and Montana's Williston Basin.
Why Is VTS Interesting?
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 80%
- Robust free cash flow margin of 24.4% gives it many options for capital deployment
Vitesse Energy is trading at $18.06 per share, or 37x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
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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.
