A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
Compass (COMP)
Trailing 12-Month Free Cash Flow Margin: 2.9%
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE: COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Does COMP Worry Us?
- Sluggish trends in its transactions suggest customers aren’t adopting its solutions as quickly as the company hoped
- Poor expense management has led to operating margin losses
- Low free cash flow margin of 2.5% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Compass is trading at $7.70 per share, or 15x forward P/E. Check out our free in-depth research report to learn more about why COMP doesn’t pass our bar.
Two Stocks to Watch:
Valmont (VMI)
Trailing 12-Month Free Cash Flow Margin: 7.6%
Credited with an invention in the 1950s that improved crop yields, Valmont (NYSE: VMI) provides engineered products and infrastructure services for the agricultural industry.
Why Are We Fans of VMI?
- Earnings per share have massively outperformed its peers over the last two years, increasing by 62% annually
- Free cash flow margin grew by 8.8 percentage points over the last five years, giving the company more chips to play with
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are growing as it capitalizes on even better market opportunities
At $398.94 per share, Valmont trades at 18.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
ATI (ATI)
Trailing 12-Month Free Cash Flow Margin: 7.3%
With its materials flying in nearly every commercial and military aircraft in service today, ATI (NYSE: ATI) produces highly specialized materials and components for aerospace, defense, medical, and energy applications using advanced metallurgy and manufacturing processes.
Why Are We Bullish on ATI?
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- 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 12.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
ATI’s stock price of $144.08 implies a valuation ratio of 35.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
