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. Keeping that in mind, 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:
Bandwidth (BAND)
Trailing 12-Month Free Cash Flow Margin: 8.1%
Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ:BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.
Why Do We Avoid BAND?
- Revenue increased by 11.9% annually over the last two years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Sky-high servicing costs result in an inferior gross margin of 37.2% that must be offset through increased usage
- Operating margin didn’t move over the last year, showing it couldn’t increase its efficiency
At $61.33 per share, Bandwidth trades at 2.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BAND.
Quest Resource (QRHC)
Trailing 12-Month Free Cash Flow Margin: 4.5%
Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ:QRHC) is a provider of waste and recycling services.
Why Are We Bearish on QRHC?
- Annual sales declines of 6.8% for the past two years show its products and services struggled to connect with the market during this cycle
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.4% for the last five years
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Quest Resource is trading at $1.38 per share, or 7.3x forward EV-to-EBITDA. If you’re considering QRHC for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Enpro (NPO)
Trailing 12-Month Free Cash Flow Margin: 13.6%
Holding a Guinness World Record for creating the world's largest gasket, Enpro (NYSE:NPO) designs, manufactures, and sells products used for machinery in various industries.
Why Should NPO Be on Your Watchlist?
- Superior product capabilities and pricing power are reflected in its top-tier gross margin of 41.1%
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 15.9% annually
- NPO is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Enpro’s stock price of $326 implies a valuation ratio of 30.6x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive 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 (+1,460% 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.