A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
Kimberly-Clark (KMB)
Trailing 12-Month Free Cash Flow Margin: 12.1%
Originally founded as a Wisconsin paper mill in 1872, Kimberly-Clark (NYSE: KMB) is now a household products powerhouse known for personal care and tissue products.
Why Does KMB Worry Us?
- Sales stagnated over the last three years and signal the need for new growth strategies
- Flat unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Projected sales decline of 1.8% for the next 12 months points to an even tougher demand environment ahead
At $128.23 per share, Kimberly-Clark trades at 16.8x forward P/E. If you’re considering KMB for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Parsons (PSN)
Trailing 12-Month Free Cash Flow Margin: 7.7%
Delivering aerospace technology during the Cold War-era, Parsons (NYSE: PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.
Why Are We Positive On PSN?
- Market share has increased this cycle as its 23.8% annual revenue growth over the last two years was exceptional
- Share buybacks catapulted its annual earnings per share growth to 35.3%, which outperformed its revenue gains over the last two years
- Historical investments are beginning to pay off as its returns on capital are growing
Parsons is trading at $67.50 per share, or 18.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Pure Storage (PSTG)
Trailing 12-Month Free Cash Flow Margin: 17.4%
Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE: PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.
Why Is PSTG a Top Pick?
- ARR growth averaged 23.5% over the past two years, showing customers are willing to take multi-year bets on its offerings
- Incremental sales over the last five years have been highly profitable as its earnings per share increased by 36.9% annually, topping its revenue gains
- PSTG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
Pure Storage’s stock price of $54.65 implies a valuation ratio of 30.3x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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