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. That said, 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:
Starbucks (SBUX)
Trailing 12-Month Free Cash Flow Margin: 9.5%
Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ: SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.
Why Is SBUX Not Exciting?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Projected sales decline of 1.6% for the next 12 months points to a tough demand environment ahead
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 3 percentage points
At $105.93 per share, Starbucks trades at 35.5x forward P/E. To fully understand why you should be careful with SBUX, check out our full research report (it’s free).
Two Stocks to Watch:
Inter Parfums (IPAR)
Trailing 12-Month Free Cash Flow Margin: 13.2%
With licenses to produce colognes and perfumes under brands such as Kate Spade, Van Cleef & Arpels, and Abercrombie & Fitch, Inter Parfums (NASDAQ: IPAR) manufactures and distributes fragrances worldwide.
Why Should IPAR Be on Your Watchlist?
- Unique products and pricing power result in a stellar gross margin of 59.7%
- Strong free cash flow margin of 14.4% enables it to reinvest or return capital consistently
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Inter Parfums is trading at $125.52 per share, or 24.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Oscar Health (OSCR)
Trailing 12-Month Free Cash Flow Margin: 21%
Founded in 2012 to simplify the notoriously complex American healthcare system, Oscar Health (NYSE: OSCR) is a technology-focused health insurance company that offers individual and small group health plans through its cloud-native platform.
Why Is OSCR a Top Pick?
- Annual revenue growth of 42.6% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings per share grew by 31.5% annually over the last four years and trumped its peers
- Free cash flow margin expanded by 19.9 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Oscar Health’s stock price of $31.38 implies a valuation ratio of 28.5x forward P/E. Is now a good time to buy? 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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
