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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here is one cash-producing company that leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
Latham (SWIM)
Trailing 12-Month Free Cash Flow Margin: 2.3%
Started as a family business, Latham (NASDAQ:SWIM) is a global designer and manufacturer of in-ground residential swimming pools and related products.
Why Are We Wary of SWIM?
- Sales tumbled by 7.7% annually over the last two years, showing consumer trends are working against its favor
- Free cash flow margin is forecasted to shrink by 1.7 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Latham is trading at $7.24 per share, or 52.7x forward P/E. Dive into our free research report to see why there are better opportunities than SWIM.
Builders FirstSource (BLDR)
Trailing 12-Month Free Cash Flow Margin: 7.5%
Headquartered in Irving, TX, Builders FirstSource (NYSE:BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.
Why Are We Cautious About BLDR?
- Annual sales declines of 7.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share have dipped by 22.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $132.99 per share, Builders FirstSource trades at 15.4x forward P/E. If you’re considering BLDR for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Itron (ITRI)
Trailing 12-Month Free Cash Flow Margin: 11.8%
Founded by a small group of engineers who wanted to build a more efficient way to read utility meters, Itron (NASDAQ:ITRI) offers energy and water management products for the utility industry, municipalities, and industrial customers.
Why Do We Like ITRI?
- Efficiency rose over the last five years as its Operating margin increased by 10.3 percentage points
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 74.4% outpaced its revenue gains
- Rising returns on capital show the company is starting to reap the benefits of its past investments
Itron’s stock price of $125.50 implies a valuation ratio of 23x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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-micro-cap company Kadant (+351% 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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