A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may struggle to keep up.
One Stock to Sell:
Frontdoor (FTDR)
Trailing 12-Month Free Cash Flow Margin: 16.9%
Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor (NASDAQ: FTDR) is a provider of home warranty and service plans.
Why Should You Sell FTDR?
- Sales trends were unexciting over the last five years as its 7.1% annual growth was below the typical consumer discretionary company
- Poor expense management has led to an operating margin of 18.9% that is below the industry average
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
At $56.64 per share, Frontdoor trades at 13.1x forward P/E. Check out our free in-depth research report to learn more about why FTDR doesn’t pass our bar.
Two Stocks to Buy:
Lyft (LYFT)
Trailing 12-Month Free Cash Flow Margin: 17.7%
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Is LYFT a Top Pick?
- Has the opportunity to boost monetization through new features and premium offerings as its active riders have grown by 12.2% annually over the last two years
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 64.1% over the last three years outstripped its revenue performance
- Free cash flow margin increased by 26.3 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Lyft is trading at $13.29 per share, or 7x forward EV/EBITDA. 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: 16.3%
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 Will PSTG Beat the Market?
- ARR growth averaged 21.2% 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 44.3% annually, topping its revenue gains
- Robust free cash flow margin of 17% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business
Pure Storage’s stock price of $74.05 implies a valuation ratio of 33.8x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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