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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may struggle to keep up.
One stock to sell:
Thermo Fisher (TMO)
Trailing 12-month free cash flow margin: 16%
With over 14,000 sales personnel and a portfolio spanning more than 2,500 technology manufacturers, Thermo Fisher Scientific (NYSE:TMO) provides scientific equipment, reagents, consumables, software, and laboratory services to pharmaceutical, biotech, academic, and healthcare customers worldwide.
Why Does TMO Give Us Pause?
- The company has faced growth challenges as its 3.9% annual revenue increases over the last five years fell short of other healthcare companies
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Flat earnings per share over the last five years underperformed the sector average
At $711.59 per share, Thermo Fisher trades at 26.2x forward P/E. If you’re considering TMO for your portfolio, see our FREE research report to learn more.
Two stocks to watch:
Terex (TEX)
Trailing 12-month free cash flow margin: 5.6%
With humble beginnings as a dump truck company, Terex (NYSE:TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.
Why Are We Fans of TEX?
- Impressive 21.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Free cash flow margin expanded by 6.4 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Terex’s stock price of $55.90 implies a valuation ratio of 9.6x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Globus Medical (GMED)
Trailing 12-month free cash flow margin: 24%
With operations spanning 64 countries and a portfolio of over 10 new products launched in 2023 alone, Globus Medical (NYSE:GMED) develops and sells implantable devices, surgical instruments, and technology solutions for spine, orthopedic, and neurosurgical procedures.
Why Could GMED Be a Winner?
- Constant currency growth averaged 20.7% over the past two years, showing it can expand globally regardless of the macroeconomic environment
- Earnings per share have massively outperformed its peers over the last five years, increasing by 18.3% annually
- Free cash flow margin expanded by 8 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Globus Medical is trading at $79.25 per share, or 15.9x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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