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 is one cash-producing company that leverages its financial strength to beat its competitors and two that may face some trouble.
Two Stocks to Sell:
Hayward (HAYW)
Trailing 12-Month Free Cash Flow Margin: 7%
Credited with introducing the first variable-speed pool pump, Hayward (NYSE:HAYW) makes residential and commercial pool equipment and accessories.
Why Does HAYW Fall Short?
- Muted 2% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Earnings per share have contracted by 9.6% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- 8.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Hayward is trading at $16.06 per share, or 18.1x forward P/E. Check out our free in-depth research report to learn more about why HAYW doesn’t pass our bar.
LeMaitre (LMAT)
Trailing 12-Month Free Cash Flow Margin: 30.9%
Founded in 1983 and named after a pioneering vascular surgeon, LeMaitre Vascular (NASDAQGM:LMAT) develops and manufactures specialized medical devices used by vascular surgeons to treat peripheral vascular disease and other circulatory conditions.
Why Are We Cautious About LMAT?
- Revenue base of $256.3 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
LeMaitre’s stock price of $102.48 implies a valuation ratio of 33x forward P/E. Dive into our free research report to see why there are better opportunities than LMAT.
One Stock to Buy:
Talos Energy (TALO)
Trailing 12-Month Free Cash Flow Margin: 18.8%
Operating its own deepwater production facilities with names like Tarantula, Pompano, and Brutus, Talos Energy (NYSE:TALO) explores for and produces oil and natural gas from offshore wells in the Gulf of Mexico and offshore Mexico.
Why Will TALO Beat the Market?
- Annual revenue growth of 16.9% over the last eight years was superb and indicates its market share increased during this cycle
- Attractive asset base leads to wonderful unit economics and a premier gross margin of 72.4%
- TALO is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $13.72 per share, Talos Energy trades at 20.4x 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
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.