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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. 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:
Labcorp (LH)
Trailing 12-Month Free Cash Flow Margin: 10%
With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE:LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.
Why Are We Wary of LH?
- 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
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 12.3 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
Labcorp is trading at $265.48 per share, or 15.6x forward P/E. If you’re considering LH for your portfolio, see our FREE research report to learn more.
Two Stocks to Buy:
Duolingo (DUOL)
Trailing 12-Month Free Cash Flow Margin: 36%
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ:DUOL) is a mobile app helping people learn new languages.
Why Are We Backing DUOL?
- Monthly Active Users are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 259% annually, topping its revenue gains
- Strong free cash flow margin of 34.8% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute
Duolingo’s stock price of $184.19 implies a valuation ratio of 25.4x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
EMCOR (EME)
Trailing 12-Month Free Cash Flow Margin: 7.1%
Through its network of over 70 subsidiaries, EMCOR (NYSE:EME) provides electrical, mechanical, and building construction and services
Why Are We Bullish on EME?
- Impressive 15.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 47.4% to outpace its revenue gains
- Returns on capital are growing as management capitalizes on its market opportunities
At $607.01 per share, EMCOR trades at 22.5x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
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 6 Stocks for this week. 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).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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