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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.
Two Stocks to Sell:
Builders FirstSource (BLDR)
Trailing 12-Month Free Cash Flow Margin: 8%
Headquartered in Irving, TX, Builders FirstSource (NYSE: BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.
Why Are We Hesitant About BLDR?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 12.1% annually over the last two years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Diminishing returns on capital suggest its earlier profit pools are drying up
Builders FirstSource is trading at $105.50 per share, or 10.8x forward P/E. If you’re considering BLDR for your portfolio, see our FREE research report to learn more.
U.S. Physical Therapy (USPH)
Trailing 12-Month Free Cash Flow Margin: 8%
With a nationwide footprint spanning 671 clinics across 42 states, U.S. Physical Therapy (NYSE: USPH) operates a network of outpatient physical therapy clinics and provides industrial injury prevention services to employers across the United States.
Why Are We Cautious About USPH?
- Subscale operations are evident in its revenue base of $699.5 million, meaning it has fewer distribution channels than its larger rivals
- Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 14.4 percentage points
U.S. Physical Therapy’s stock price of $74.19 implies a valuation ratio of 27.5x forward P/E. To fully understand why you should be careful with USPH, check out our full research report (it’s free).
One Stock to Buy:
AutoZone (AZO)
Trailing 12-Month Free Cash Flow Margin: 10.6%
Aiming to be a one-stop shop for the DIY customer, AutoZone (NYSE: AZO) is an auto parts and accessories retailer that sells everything from car batteries to windshield wiper fluid to brake pads.
Why Do We Love AZO?
- Store expansion strategy is justified by its healthy same-store sales
- Differentiated product assortment is reflected in its best-in-class gross margin of 51.8%
- Strong free cash flow margin of 10.6% enables it to reinvest or return capital consistently
At $3,750 per share, AutoZone trades at 22.7x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
