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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are two cash-producing companies that reinvest wisely to drive long-term success and one best left off your watchlist.
One Stock to Sell:
Red Rock Resorts (RRR)
Trailing 12-Month Free Cash Flow Margin: 13.7%
Founded in 1976, Red Rock Resorts (NASDAQ: RRR) operates a range of casino resorts and entertainment properties, primarily in the Las Vegas metropolitan area.
Why Should You Dump RRR?
- Muted 11.2% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Free cash flow margin is forecasted to shrink by 1.2 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Red Rock Resorts is trading at $65.97 per share, or 22.6x forward P/E. To fully understand why you should be careful with RRR, check out our full research report (it’s free).
Two Stocks to Watch:
Howmet (HWM)
Trailing 12-Month Free Cash Flow Margin: 17.3%
Inventing the first forged aluminum truck wheel, Howmet (NYSE: HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.
Why Will HWM Outperform?
- Annual revenue growth of 11.5% over the past two years was outstanding, reflecting market share gains this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin jumped by 12.3 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Howmet’s stock price of $252.55 implies a valuation ratio of 54.1x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
VSE Corporation (VSEC)
Trailing 12-Month Free Cash Flow Margin: 2.4%
With roots dating back to 1959 and a strategic focus on extending the life of transportation assets, VSE Corporation (NASDAQ: VSEC) provides aftermarket parts distribution and maintenance, repair, and overhaul services for aircraft and vehicle fleets in commercial and government markets.
Why Does VSEC Catch Our Eye?
- Annual revenue growth of 18% over the last two years was superb and indicates its market share increased during this cycle
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
At $226.00 per share, VSE Corporation trades at 53.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
