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. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.
Two Stocks to Sell:
Richardson Electronics (RELL)
Trailing 12-Month Free Cash Flow Margin: 4.1%
Founded in 1947, Richardson Electronics (NASDAQ: RELL) is a distributor of power grid and microwave tubes as well as consumables related to those products.
Why Do We Avoid RELL?
- Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 2% declines over the past two years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Richardson Electronics’s stock price of $10.62 implies a valuation ratio of 60.1x forward P/E. If you’re considering RELL for your portfolio, see our FREE research report to learn more.
TaskUs (TASK)
Trailing 12-Month Free Cash Flow Margin: 4.4%
Starting as a virtual assistant service in 2008 before evolving into a global digital services provider, TaskUs (NASDAQ: TASK) provides outsourced digital services including customer experience management, content moderation, and AI data services to innovative technology companies.
Why Are We Wary of TASK?
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 2% annually
- 3.7 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Underwhelming 4.3% return on capital reflects management’s difficulties in finding profitable growth opportunities
TaskUs is trading at $13.84 per share, or 8.7x forward P/E. Check out our free in-depth research report to learn more about why TASK doesn’t pass our bar.
One Stock to Buy:
Huron (HURN)
Trailing 12-Month Free Cash Flow Margin: 10.6%
Founded in 2002 during a time of significant regulatory change in corporate America, Huron Consulting Group (NASDAQ: HURN) is a professional services company that helps organizations develop growth strategies, optimize operations, and implement digital transformation solutions.
Why Are We Bullish on HURN?
- Impressive 10.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Adjusted operating margin expanded by 7.5 percentage points over the last five years as it scaled and became more efficient
- Share repurchases over the last two years enabled its annual earnings per share growth of 27.8% to outpace its revenue gains
At $153.14 per share, Huron trades at 19.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
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 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-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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