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.
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 excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
Q2 Holdings (QTWO)
Trailing 12-Month Free Cash Flow Margin: 22.3%
With a platform powering digital services for approximately 25 million account holders across America, Q2 Holdings (NYSE: QTWO) provides cloud-based digital solutions that help financial institutions, fintechs, and alternative finance companies deliver modern banking experiences to their customers.
Why Are We Wary of QTWO?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 7.7% underwhelmed
- Estimated sales growth of 9.6% for the next 12 months implies demand will slow from its two-year trend
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 57%, one of the worst among software companies
Q2 Holdings is trading at $59.09 per share, or 4.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than QTWO.
Envista (NVST)
Trailing 12-Month Free Cash Flow Margin: 7.8%
Uniting more than 30 trusted brands including Nobel Biocare, Ormco, and DEXIS under one corporate umbrella, Envista Holdings (NYSE: NVST) is a global dental products company that provides equipment, consumables, and specialized technologies for dental professionals.
Why Do We Avoid NVST?
- Muted 4.7% annual revenue growth over the last two years shows its demand lagged behind its healthcare peers
- Negative returns on capital show that some of its growth strategies have backfired, and its shrinking returns suggest its past profit sources are losing steam
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Envista’s stock price of $27.78 implies a valuation ratio of 19.7x forward P/E. If you’re considering NVST for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Terex (TEX)
Trailing 12-Month Free Cash Flow Margin: 5.2%
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 Could TEX Be a Winner?
- Annual revenue growth of 14.1% over the past five years was outstanding, reflecting market share gains this cycle
- Projected revenue growth of 25.9% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Free cash flow margin jumped by 6.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $62.26 per share, Terex trades at 12x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
