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. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one that may struggle to keep up.

One Stock to Sell:

Tesla (TSLA)

Trailing 12-Month Free Cash Flow Margin: 6%

Originally founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla (NASDAQ: TSLA) is an electric vehicle company accelerating the world’s transition to sustainable energy.

Why Is TSLA Risky?

1. Tesla's scale advantage in EV production leads to gross margins that exceed incumbents such as General Motors and Ford. However, a softer macroeconomic backdrop and tariff pressures have weighed on automobile sales, which are highly cyclical.
2. The company's execution ability is a question mark given its long history of delays, such as the Cybertruck and Robotaxi launches. Its sizeable investments in projects with uncertain return timelines, like Optimus, also raise skepticism from investors.
3. On the bright side, Tesla's Megapack product solves a critical problem for utilities needing renewable energy storage solutions. This innovation has made the energy segment the most profitable and fastest-growing business line for the company.

Tesla is trading at $418.05 per share, or 198.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than TSLA.

Two Stocks to Watch:

Cloudflare (NET)

Trailing 12-Month Free Cash Flow Margin: 9.5%

With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE: NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.

Why Will NET Outperform?

1. Billings growth has averaged 30.3% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
2. Notable projected revenue growth of 26.3% for the next 12 months hints at market share gains
3. Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale

At $223.68 per share, Cloudflare trades at 32.7x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.

Lam Research (LRCX)

Trailing 12-Month Free Cash Flow Margin: 29.4%

Founded in 1980 by David Lam, the man who pioneered semiconductor etching technology, Lam Research (NASDAQ: LRCX) is one of the leading providers of wafer fabrication equipment used to make semiconductors.

Why Are We Fans of LRCX?

1. Annual revenue growth of 12.9% over the last five years was superb and indicates its market share increased during this cycle
2. Free cash flow margin grew by 7.2 percentage points over the last five years, giving the company more chips to play with
3. ROIC punches in at 64.1%, illustrating management’s expertise in identifying profitable investments

Lam Research’s stock price of $126.54 implies a valuation ratio of 31.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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