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 are two cash-producing companies that reinvest wisely to drive long-term success and one that may face some trouble.
One Stock to Sell:
Funko (FNKO)
Trailing 12-Month Free Cash Flow Margin: 5.1%
Boasting partnerships with media franchises like Marvel and One Piece, Funko (NASDAQ: FNKO) is a company specializing in creating and distributing licensed pop culture collectibles.
Why Should You Dump FNKO?
- Products and services have few die-hard fans as sales have declined by 10% annually over the last two years
- Earnings per share fell by 15% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Funko is trading at $4.25 per share, or 20.2x forward P/E. Check out our free in-depth research report to learn more about why FNKO doesn’t pass our bar.
Two Stocks to Watch:
Quanta (PWR)
Trailing 12-Month Free Cash Flow Margin: 6%
A construction engineering services company, Quanta (NYSE: PWR) provides infrastructure solutions to a variety of sectors, including energy and communications.
Why Should You Buy PWR?
- Backlog has averaged 23.1% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Forecasted revenue growth of 10.3% for the next 12 months indicates its momentum over the last two years is sustainable
- Earnings per share grew by 22.4% annually over the last two years and trumped its peers
Quanta’s stock price of $337.67 implies a valuation ratio of 32x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
Armstrong World (AWI)
Trailing 12-Month Free Cash Flow Margin: 20.2%
Started as a two-man shop dating back to the 1860s, Armstrong (NYSE: AWI) provides ceiling and wall products to commercial and residential spaces.
Why Does AWI Stand Out?
- Solid 9.2% annual revenue growth over the last two years indicates its offering’s solve complex business issues
- Highly efficient business model is illustrated by its impressive 24.6% operating margin
- Strong free cash flow margin of 19.6% enables it to reinvest or return capital consistently
At $155.98 per share, Armstrong World trades at 21.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
