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 are two cash-producing companies that reinvest wisely to drive long-term success and one best left off your watchlist.
One Stock to Sell:
PlayStudios (MYPS)
Trailing 12-Month Free Cash Flow Margin: 11.2%
Founded by a team of former gaming industry executives, PlayStudios (NASDAQ: MYPS) offers free-to-play digital casino games.
Why Is MYPS Risky?
- Annual revenue declines of 4.2% over the last five years indicate problems with its market positioning
- Low free cash flow margin of 13.3% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Returns on capital are increasing as management makes relatively better investment decisions
PlayStudios is trading at $0.49 per share, or 0.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MYPS.
Two Stocks to Buy:
Badger Meter (BMI)
Trailing 12-Month Free Cash Flow Margin: 18.9%
The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE: BMI) provides water control and measure equipment to various industries.
Why Will BMI Outperform?
- Impressive 15.6% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Additional sales over the last five years increased its profitability as the 20.3% annual growth in its earnings per share outpaced its revenue
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its growing cash flow gives it even more resources to deploy
Badger Meter’s stock price of $138.77 implies a valuation ratio of 29.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
IMAX (IMAX)
Trailing 12-Month Free Cash Flow Margin: 22.2%
Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE: IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.
Why Do We Love IMAX?
- Annual revenue growth of 23.5% over the last five years was superb and indicates its market share increased during this cycle
- Free cash flow margin expanded by 23.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
At $40.46 per share, IMAX trades at 23.8x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
