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. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
Cable One (CABO)
Trailing 12-Month Free Cash Flow Margin: 17.5%
Founded in 1986, Cable One (NYSE:CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.
Why Do We Think CABO Will Underperform?
- Demand for its offerings was relatively low as its number of residential data subscribers has underwhelmed
- Free cash flow margin is forecasted to shrink by 2.6 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Cable One is trading at $21.48 per share, or 3.9x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CABO.
Two Stocks to Watch:
Restaurant Brands (QSR)
Trailing 12-Month Free Cash Flow Margin: 16.8%
Formed through a strategic merger, Restaurant Brands International (NYSE:QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.
Why Could QSR Be a Winner?
- Same-store sales provide a solid foundation for the steady expansion of its restaurants
- Highly efficient business model is illustrated by its impressive 25.2% operating margin, and it turbocharged its profits by achieving some fixed cost leverage
- Strong free cash flow margin of 15.9% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
At $76.55 per share, Restaurant Brands trades at 18.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Incyte (INCY)
Trailing 12-Month Free Cash Flow Margin: 32.7%
Founded in 1991 and evolving from a genomics research firm to a commercial-stage drug developer, Incyte (NASDAQ:INCY) is a biopharmaceutical company that discovers, develops, and commercializes proprietary therapeutics for cancer and inflammatory diseases.
Why Will INCY Outperform?
- Annual revenue growth of 22.8% over the past two years was outstanding, reflecting market share gains this cycle
- Free cash flow margin expanded by 12.6 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Returns on capital are climbing as management makes more lucrative bets
Incyte’s stock price of $123.31 implies a valuation ratio of 53.4x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
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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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.