A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, 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:
Evolent Health (EVH)
Trailing 12-Month Free Cash Flow Margin: 1.2%
Founded in 2011 to transform how healthcare is delivered to patients with complex needs, Evolent Health (NYSE:EVH) provides specialty care management services and technology solutions that help health plans and providers deliver better care for patients with complex conditions.
Why Are We Cautious About EVH?
- Weak average lives on platform over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $4.23 per share, Evolent Health trades at 11.5x forward P/E. Check out our free in-depth research report to learn more about why EVH doesn’t pass our bar.
Lumen (LUMN)
Trailing 12-Month Free Cash Flow Margin: 16.7%
With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE:LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.
Why Do We Steer Clear of LUMN?
- Sales tumbled by 10.2% annually over the last five years, showing market trends are working against it during this cycle
- Adjusted operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 18% annually, worse than its revenue
Lumen is trading at $5.05 per share, or 5.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LUMN in your portfolio.
One Stock to Buy:
Philip Morris (PM)
Trailing 12-Month Free Cash Flow Margin: 29.9%
Founded in 1847, Philip Morris International (NYSE:PM) manufactures and sells a wide range of tobacco and nicotine-containing products, including cigarettes, heated tobacco products, and oral nicotine pouches.
Why Will PM Outperform?
- Unique products and pricing power result in a best-in-class gross margin of 67%
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 37%, and it turbocharged its profits by achieving some fixed cost leverage
- PM is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its growing cash flow gives it even more resources to deploy
Philip Morris’s stock price of $201.95 implies a valuation ratio of 23x forward P/E. Is now the right time to buy? See for yourself in our comprehensive 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.
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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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.