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 best left off your watchlist.
One Stock to Sell:
GoDaddy (GDDY)
Trailing 12-Month Free Cash Flow Margin: 33.9%
Known for its memorable Super Bowl commercials that put it on the map, GoDaddy (NYSE: GDDY) is a domain registrar and web services provider that helps entrepreneurs establish an online presence through domain registration, website building, hosting, and e-commerce tools.
Why Should You Sell GDDY?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 6.2% underwhelmed
- Estimated sales growth of 5.2% for the next 12 months implies demand will slow from its two-year trend
- Gross margin of 63.8% reflects its relatively high servicing costs
GoDaddy’s stock price of $97.88 implies a valuation ratio of 2.4x forward price-to-sales. If you’re considering GDDY for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Novanta (NOVT)
Trailing 12-Month Free Cash Flow Margin: 11.1%
Originally a pioneer in the laser scanning industry during the late 1960s, Novanta (NASDAQ: NOVT) offers medicine and manufacturing technology to the medical, life sciences, and manufacturing industries.
Why Is NOVT on Our Radar?
- Annual revenue growth of 10.7% over the last five years was superb and indicates its market share increased during this cycle
- Projected revenue growth of 20.5% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Offerings are difficult to replicate at scale and result in a top-tier gross margin of 44.4%
At $138.10 per share, Novanta trades at 36.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Cactus (WHD)
Trailing 12-Month Free Cash Flow Margin: 23.8%
Named for the spiky wellhead equipment that reminded founders of desert cacti, Cactus (NYSE: WHD) manufactures wellheads, valves, and spoolable pipes used in drilling and producing oil and gas wells.
Why Are We Fans of WHD?
- Annual revenue growth of 28.5% over the past ten years was outstanding, reflecting market share gains this cycle
- EBITDA margin was unchanged over the last five years, suggesting it failed to gain leverage on its fixed costs
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Cactus is trading at $69.96 per share, or 21.7x forward P/E. Is now the time to initiate a position? Find out in our full 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.
