A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may face some trouble.
Two Stocks to Sell:
Wolverine Worldwide (WWW)
Trailing 12-Month Free Cash Flow Margin: 9.1%
Founded in 1883, Wolverine Worldwide (NYSE:WWW) is a global footwear company with a diverse portfolio of brands including Merrell, Hush Puppies, and Saucony.
Why Is WWW Risky?
- Sales tumbled by 5% annually over the last five years, showing consumer trends are working against its favor
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Negative returns on capital show that some of its growth strategies have backfired
At $11.02 per share, Wolverine Worldwide trades at 8.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why WWW doesn’t pass our bar.
Array (ARRY)
Trailing 12-Month Free Cash Flow Margin: 15.8%
Going public in October 2020, Array (NASDAQ:ARRY) is a global manufacturer of ground-mounting tracking systems for utility and distributed generation solar energy projects.
Why Do We Steer Clear of ARRY?
- Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Cash-burning history makes us doubt the long-term viability of its business model
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Array’s stock price of $4.31 implies a valuation ratio of 5.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than ARRY.
One Stock to Watch:
Caterpillar (CAT)
Trailing 12-Month Free Cash Flow Margin: 15%
With its iconic yellow machinery working on construction sites, Caterpillar (NYSE:CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.
Why Could CAT Be a Winner?
- Operating margin improvement of 9.3 percentage points over the last five years demonstrates its ability to scale efficiently
- Share buybacks catapulted its annual earnings per share growth to 25.7%, which outperformed its revenue gains over the last two years
- Rising returns on capital show management is finding more attractive investment opportunities
Caterpillar is trading at $291.40 per share, or 13.6x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.