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 is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
Gilead Sciences (GILD)
Trailing 12-Month Free Cash Flow Margin: 42.5%
From its groundbreaking work in developing the first single-tablet regimens for HIV treatment, Gilead Sciences (NASDAQ: GILD) develops and markets innovative medicines for life-threatening diseases including HIV, viral hepatitis, COVID-19, and cancer.
Why Is GILD Not Exciting?
- Annual sales growth of 2.7% over the last five years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 34.2 percentage points
- Earnings per share have contracted by 15.4% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
Gilead Sciences is trading at $149.30 per share, or 16.4x forward P/E. Check out our free in-depth research report to learn more about why GILD doesn’t pass our bar.
US Foods (USFD)
Trailing 12-Month Free Cash Flow Margin: 2.4%
With a fleet of over 6,500 trucks delivering everything from fresh produce to frozen entrées, US Foods (NYSE: USFD) is a major foodservice distributor that supplies food products and services to approximately 250,000 restaurants, healthcare facilities, hotels, and educational institutions across the United States.
Why Do We Pass on USFD?
- Products are reaching more customers as its unit sales averaged 1.9% growth over the past two years
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Free cash flow margin is not anticipated to grow over the next year
At $94.64 per share, US Foods trades at 18x forward P/E. To fully understand why you should be careful with USFD, check out our full research report (it’s free).
One Stock to Buy:
Armstrong World (AWI)
Trailing 12-Month Free Cash Flow Margin: 14.6%
Started as a two-man shop dating back to the 1860s, Armstrong (NYSE: AWI) provides ceiling and wall products to commercial and residential spaces.
Why Will AWI Beat the Market?
- Annual revenue growth of 12% over the last two years was superb and indicates its market share increased during this cycle
- Healthy operating margin of 25% shows it’s a well-run company with efficient processes, and its operating leverage amplified its profits over the last five years
- Free cash flow margin grew by 6.8 percentage points over the last five years, giving the company more chips to play with
Armstrong World’s stock price of $161.91 implies a valuation ratio of 17.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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.
