While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
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 reinvest wisely to drive long-term success and one that may face some trouble.
One Stock to Sell:
NVR (NVR)
Trailing 12-Month Free Cash Flow Margin: 12.6%
Known for its unique land acquisition strategy, NVR (NYSE: NVR) is a respected homebuilder and mortgage company in the United States.
Why Do We Pass on NVR?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Sales over the last two years were less profitable as its earnings per share fell by 7.5% annually while its revenue was flat
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
NVR is trading at $6,483 per share, or 16.6x forward P/E. Check out our free in-depth research report to learn more about why NVR doesn’t pass our bar.
Two Stocks to Buy:
Pinterest (PINS)
Trailing 12-Month Free Cash Flow Margin: 27.6%
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
Why Is PINS a Good Business?
- Monthly Active Users are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Share repurchases over the last three years enabled its annual earnings per share growth of 40.9% to outpace its revenue gains
- Strong free cash flow margin of 26.5% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $20.33 per share, Pinterest trades at 9x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.
GitLab (GTLB)
Trailing 12-Month Free Cash Flow Margin: 26.1%
With its all-remote workforce pioneering a new approach to software development, GitLab (NASDAQ: GTLB) provides a single-application DevSecOps platform that helps development, operations, and security teams collaborate to build, secure, and deploy software faster.
Why Should You Buy GTLB?
- Impressive 27.1% annual revenue growth over the last two years indicates it’s winning market share
- Customers view its software as mission-critical to their operations as its ARR has averaged 24.9% growth over the last year
- Prominent and differentiated software leads to a best-in-class gross margin of 86.8%
GitLab’s stock price of $26.48 implies a valuation ratio of 3.9x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
