1 Cash-Producing Stock Worth Your Attention and 2 We Ignore
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.
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 leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
Lowe's (LOW)
Trailing 12-Month Free Cash Flow Margin: 8.4%
Founded in North Carolina as Lowe's North Wilkesboro Hardware, the company is a home improvement retailer that sells everything from paint to tools to building materials.
Why Does LOW Worry Us?
- Products aren't resonating with the market as its revenue declined by 4.2% annually over the last three years
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 33.4%
At $243.18 per share, Lowe's trades at 19.1x forward P/E. To fully understand why you should be careful with LOW, check out our full research report (it’s free for active Edge members).
ICF International (ICFI)
Trailing 12-Month Free Cash Flow Margin: 7.3%
Operating at the intersection of policy, technology, and implementation for over five decades, ICF International (NASDAQ:ICFI) provides professional consulting services and technology solutions to government agencies and commercial clients across energy, health, environment, and security sectors.
Why Are We Out on ICFI?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 2.9% declines over the past two years
- Projected sales decline of 3% for the next 12 months points to an even tougher demand environment ahead
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 6% annually
ICF International is trading at $86.49 per share, or 13x forward P/E. Check out our free in-depth research report to learn more about why ICFI doesn’t pass our bar.
One Stock to Watch:
Installed Building Products (IBP)
Trailing 12-Month Free Cash Flow Margin: 10.2%
Founded in 1977, Installed Building Products (NYSE:IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.
Why Does IBP Stand Out?
- Market share has increased this cycle as its 13% annual revenue growth over the last five years was exceptional
- Share repurchases over the last five years enabled its annual earnings per share growth of 22.4% to outpace its revenue gains
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are growing as it capitalizes on even better market opportunities
Installed Building Products’s stock price of $264.47 implies a valuation ratio of 24.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
High-Quality Stocks for All Market Conditions
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