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. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.
Two Stocks to Sell:
Middleby (MIDD)
Trailing 12-Month Free Cash Flow Margin: 15.1%
Holding a Guinness World Record for creating the world’s fastest conveyor pizza oven, Middleby (NYSE:MIDD) is a food service and equipment manufacturer.
Why Is MIDD Risky?
- 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
- Estimated sales growth of 2% for the next 12 months is soft and implies weaker demand
- Earnings per share lagged its peers over the last two years as they only grew by 1.2% annually
Middleby is trading at $141.14 per share, or 15.1x forward P/E. Dive into our free research report to see why there are better opportunities than MIDD.
Fidelity National Financial (FNF)
Trailing 12-Month Free Cash Flow Margin: 50.6%
Issuing more title insurance policies than any other company in the United States, Fidelity National Financial (NYSE:FNF) provides title insurance and escrow services for real estate transactions while also offering annuities and life insurance through its F&G subsidiary.
Why Are We Cautious About FNF?
- Net premiums earned remained stagnant over the last five years, indicating expansion challenges this cycle
- Expenses have increased as a percentage of revenue over the last four years as its pre-tax profit margin fell by 10.9 percentage points
- Annual earnings per share growth of 3.4% underperformed its revenue over the last five years, showing its incremental sales were less profitable
At $60.42 per share, Fidelity National Financial trades at 1.7x forward P/B. Check out our free in-depth research report to learn more about why FNF doesn’t pass our bar.
One Stock to Buy:
Construction Partners (ROAD)
Trailing 12-Month Free Cash Flow Margin: 6.9%
Founded in 2001, Construction Partners (NASDAQ:ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.
Why Are We Bullish on ROAD?
- Core business can prosper without any help from acquisitions as its organic revenue growth averaged 9.6% over the past two years
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 70.6% annually, topping its revenue gains
- Free cash flow margin increased by 5.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Construction Partners’s stock price of $121.99 implies a valuation ratio of 44.9x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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 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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