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. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
FactSet (FDS)
Trailing 12-Month Free Cash Flow Margin: 28.4%
Founded in 1978 when financial data was still primarily delivered through paper reports, FactSet (NYSE: FDS) provides financial data, analytics, and technology solutions that investment professionals use to research, analyze, and manage their portfolios.
Why Does FDS Worry Us?
- Sales trends were unexciting over the last two years as its 5.6% annual growth was below the typical financials company
- Earnings per share lagged its peers over the last two years as they only grew by 7.1% annually
FactSet is trading at $222.50 per share, or 12.1x forward P/E. If you’re considering FDS for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Marvell Technology (MRVL)
Trailing 12-Month Free Cash Flow Margin: 17%
Moving away from a low margin storage device management chips in one of the biggest semiconductor business model pivots of the past decade, Marvell Technology (NASDAQ: MRVL) is a fabless designer of special purpose data processing and networking chips used by data centers, communications carriers, enterprises, and autos.
Why Does MRVL Stand Out?
- Impressive 22.5% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 32.6%
- Operating margin expanded by 23.9 percentage points over the last five years as it scaled and became more efficient
At $162.90 per share, Marvell Technology trades at 43.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
iRhythm (IRTC)
Trailing 12-Month Free Cash Flow Margin: 4.6%
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ: IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Do We Like IRTC?
- Impressive 23.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Adjusted operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Free cash flow turned positive over the last five years, showing the company is at an important crossroads
iRhythm’s stock price of $122.26 implies a valuation ratio of 40.6x forward EV-to-EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
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