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. 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:
Matrix Service (MTRX)
Trailing 12-Month Free Cash Flow Margin: 15.8%
Founded in Oklahoma, Matrix Service (NASDAQ: MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.
Why Is MTRX Not Exciting?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 10.7% annually over the last five years
- Gross margin of 4.2% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share dropped by 23.9% annually, worse than its revenue
At $12.79 per share, Matrix Service trades at 17.9x forward P/E. Check out our free in-depth research report to learn more about why MTRX doesn’t pass our bar.
SAIC (SAIC)
Trailing 12-Month Free Cash Flow Margin: 5.9%
With over five decades of experience supporting national security missions, Science Applications International Corporation (NASDAQ: SAIC) provides technical, engineering, and enterprise IT services primarily to U.S. government agencies and military branches.
Why Should You Dump SAIC?
- Sales tumbled by 1.5% annually over the last two years, showing market trends are working against its favor during this cycle
- Estimated sales growth of 2.8% for the next 12 months is soft and implies weaker demand
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
SAIC’s stock price of $109.33 implies a valuation ratio of 11.2x forward P/E. To fully understand why you should be careful with SAIC, check out our full research report (it’s free).
One Stock to Watch:
MACOM (MTSI)
Trailing 12-Month Free Cash Flow Margin: 22.5%
Founded in the 1950s as Microwave Associates, a communications supplier to the US Army Signal Corp, today MACOM Technology Solutions (NASDAQ: MTSI) is a provider of analog chips used in optical, wireless, and satellite networks.
Why Does MTSI Stand Out?
- Impressive 9.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 21.6%
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 81.7% annually
MACOM is trading at $139.17 per share, or 37.1x 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
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. 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-small-cap company Exlservice (+354% 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
