2 Cash-Producing Stocks on Our Buy List and 1 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.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, 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:
Stitch Fix (SFIX)
Trailing 12-Month Free Cash Flow Margin: 1.4%
One of the original subscription box companies, Stitch Fix (NASDAQ:SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Why Do We Pass on SFIX?
- Sluggish trends in its active clients suggest customers aren’t adopting its solutions as quickly as the company hoped
- Poor free cash flow margin of 1.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Stitch Fix’s stock price of $3.51 implies a valuation ratio of 7.3x forward EV-to-EBITDA. If you’re considering SFIX for your portfolio, see our FREE research report to learn more.
Two Stocks to Buy:
Philip Morris (PM)
Trailing 12-Month Free Cash Flow Margin: 31%
Founded in 1847, Philip Morris International (NYSE:PM) manufactures and sells a wide range of tobacco and nicotine-containing products, including cigarettes, heated tobacco products, and oral nicotine pouches.
Why Is PM a Good Business?
- Differentiated product offerings are difficult to replicate at scale and result in a best-in-class gross margin of 67%
- Excellent operating margin of 37% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business
Philip Morris is trading at $190.66 per share, or 22.3x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
QuinStreet (QNST)
Trailing 12-Month Free Cash Flow Margin: 8%
Founded during the dot-com era in 1999 and specializing in high-intent consumer traffic, QuinStreet (NASDAQ:QNST) operates digital performance marketplaces that connect clients in financial and home services with consumers actively searching for their products.
Why Should You Buy QNST?
- Annual revenue growth of 47.2% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 628% annually, topping its revenue gains
- Historical investments are beginning to pay off as its returns on capital are growing
At $15.00 per share, QuinStreet trades at 10.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.