Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
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 reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
Advanced Energy (AEIS)
Trailing 12-Month Free Cash Flow Margin: 3.6%
Pioneering technologies for radio frequency power delivery, Advanced Energy (NASDAQ:AEIS) provides power supplies, thermal management systems, and measurement and control instruments for various manufacturing processes.
Why Are We Hesitant About AEIS?
- Annual revenue growth of 5.6% over the last five years was below our standards for the industrials sector
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 5.3% annually
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $316.76 per share, Advanced Energy trades at 31.2x forward P/E. Read our free research report to see why you should think twice about including AEIS in your portfolio.
GoodRx (GDRX)
Trailing 12-Month Free Cash Flow Margin: 21%
Started in 2011 to tackle the problem of high prescription drug costs in America, GoodRx (NASDAQ:GDRX) operates a digital platform that helps consumers find lower prices on prescription medications through price comparison tools and discount codes.
Why Do We Avoid GDRX?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Modest revenue base of $787.9 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Negative returns on capital show that some of its growth strategies have backfired
GoodRx is trading at $2.86 per share, or 9x forward P/E. To fully understand why you should be careful with GDRX, check out our full research report (it’s free).
One Stock to Watch:
Carvana (CVNA)
Trailing 12-Month Free Cash Flow Margin: 3.3%
Known for its glass tower car vending machines, Carvana (NYSE:CVNA) provides a convenient automotive shopping experience by offering an online platform for buying and selling used cars.
Why Is CVNA on Our Radar?
- Remarkable 21% revenue growth over the last three years demonstrates its ability to capture significant market share
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 40.3% annually, topping its revenue gains
- Free cash flow margin expanded by 12.1 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
Carvana’s stock price of $60.24 implies a valuation ratio of 15.6x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.