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. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.
Two Stocks to Sell:
Affirm (AFRM)
Trailing 12-Month Free Cash Flow Margin: 19.8%
Founded by PayPal co-founder Max Levchin with a mission to create honest financial products, Affirm (NASDAQ: AFRM) provides a payment network that allows consumers to make purchases and pay for them over time with transparent, flexible installment loans.
Why Does AFRM Give Us Pause?
- Negative return on equity shows management lost money while trying to expand the business
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Affirm’s stock price of $76.62 implies a valuation ratio of 21.6x forward P/E. Dive into our free research report to see why there are better opportunities than AFRM.
ExxonMobil (XOM)
Trailing 12-Month Free Cash Flow Margin: 8.3%
One of the successor companies to John D. Rockefeller's Standard Oil monopoly that was broken up in 1911, ExxonMobil (NYSE: XOM) explores for and produces crude oil and natural gas, refines and sells petroleum products, and manufactures petrochemicals.
Why Is XOM Not Exciting?
- Costly operations and weak unit economics result in an inferior gross margin of 43.9% that must be offset through higher production volumes
- Efficiency has decreased over the last five years as its EBITDA margin fell by 1.3 percentage points
At $154.79 per share, ExxonMobil trades at 12.6x forward P/E. To fully understand why you should be careful with XOM, check out our full research report (it’s free).
One Stock to Buy:
Motorola Solutions (MSI)
Trailing 12-Month Free Cash Flow Margin: 21.9%
Born from the company that invented the first portable handheld police radio in 1940, Motorola Solutions (NYSE: MSI) provides mission-critical communications, video security, and command center software solutions for public safety agencies and enterprise customers.
Why Are We Bullish on MSI?
- Impressive 9.2% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Adjusted operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Strong free cash flow margin of 18.9% enables it to reinvest or return capital consistently, and its growing cash flow gives it even more resources to deploy
Motorola Solutions is trading at $473.25 per share, or 24.4x 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
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
