A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
Encompass Health (EHC)
Trailing 12-Month Free Cash Flow Margin: 13%
With a network of 161 specialized facilities across 37 states and Puerto Rico, Encompass Health (NYSE: EHC) operates inpatient rehabilitation hospitals that help patients recover from strokes, hip fractures, and other debilitating conditions.
Why Are We Cautious About EHC?
- Sales trends were unexciting over the last five years as its 6.5% annual growth was below the typical healthcare company
- Weak comparable store sales trends over the past two years suggest there may be few opportunities in its core markets to open new facilities
- Adjusted operating margin was unchanged over the last five years, suggesting it failed to gain leverage on its fixed costs
Encompass Health’s stock price of $110.74 implies a valuation ratio of 17.5x forward P/E. To fully understand why you should be careful with EHC, check out our full research report (it’s free).
Alight (ALIT)
Trailing 12-Month Free Cash Flow Margin: 11.5%
Born from a corporate spinoff in 2017 to focus on employee experience technology, Alight (NYSE: ALIT) provides human capital management solutions that help companies administer employee benefits, payroll, and workforce management systems.
Why Do We Steer Clear of ALIT?
- Sales tumbled by 3.8% annually over the last five years, showing market trends are working against it during this cycle
- Earnings per share have dipped by 19.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $18.92 per share, Alight trades at 63.9x forward P/E. Read our free research report to see why you should think twice about including ALIT in your portfolio.
One Stock to Buy:
Huron (HURN)
Trailing 12-Month Free Cash Flow Margin: 6.9%
Founded in 2002 during a time of significant regulatory change in corporate America, Huron Consulting Group (NASDAQ: HURN) is a professional services company that helps organizations develop growth strategies, optimize operations, and implement digital transformation solutions.
What Makes HURN Stand Out?
- Impressive 15.9% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 22.1% exceeded its revenue gains over the last two years
- Free cash flow margin expanded by 6.7 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Huron is trading at $106.17 per share, or 11.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
