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:
Teledyne (TDY)
Trailing 12-Month Free Cash Flow Margin: 18.3%
Playing a role in mapping the ocean floor as we know it today, Teledyne (NYSE: TDY) offers digital imaging and instrumentation products for various industries.
Why Do We Think Twice About TDY?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Teledyne’s stock price of $518.61 implies a valuation ratio of 22.2x forward P/E. Dive into our free research report to see why there are better opportunities than TDY.
Two Stocks to Watch:
Freshworks (FRSH)
Trailing 12-Month Free Cash Flow Margin: 22.6%
Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.
Why Do We Like FRSH?
- Customers view its software as mission-critical to their operations as its ARR has averaged 20.2% growth over the last year
- Software is difficult to replicate at scale and results in a top-tier gross margin of 84.4%
- Operating margin improvement of 9.2 percentage points over the last year demonstrates its ability to scale efficiently
At $15.65 per share, Freshworks trades at 5.6x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
QuinStreet (QNST)
Trailing 12-Month Free Cash Flow Margin: 5.8%
Founded during the dot-com era in 1999 and specializing in high-intent consumer traffic, QuinStreet (NASDAQ: QNST) operates digital performance marketplaces that connect clients in financial and home services with consumers actively searching for their products.
Why Will QNST Outperform?
- Impressive 31.4% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Estimated revenue growth of 9.5% for the next 12 months implies its momentum over the last two years will continue
- Earnings per share have massively outperformed its peers over the last two years, increasing by 106% annually
QuinStreet is trading at $15.68 per share, or 14.3x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking 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 176% over the last five years.
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
