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 reinvest wisely to drive long-term success and one that may struggle to keep up.
One Stock to Sell:
Union Pacific (UNP)
Trailing 12-Month Free Cash Flow Margin: 11.3%
Part of the transcontinental railroad project, Union Pacific (NYSE: UNP) is a freight transportation company that operates a major railroad network.
Why Are We Out on UNP?
- Weak unit sales over the past two years imply it may need to invest in improvements to get back on track
- Flat earnings per share over the last two years underperformed the sector average
- Free cash flow margin dropped by 6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Union Pacific is trading at $219.24 per share, or 18.2x forward P/E. To fully understand why you should be careful with UNP, check out our full research report (it’s free).
Two Stocks to Watch:
Fiverr (FVRR)
Trailing 12-Month Free Cash Flow Margin: 21.8%
Based in Tel Aviv, Fiverr (NYSE: FVRR) operates a fixed price global freelance marketplace for digital services.
Why Could FVRR Be a Winner?
- Customer spending is rising as the company has focused on monetization over the last two years, leading to 17.4% annual growth in its average revenue per buyer
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 52.1% annually, topping its revenue gains
- Free cash flow margin expanded by 9.7 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
Fiverr’s stock price of $32.99 implies a valuation ratio of 14x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Valmont (VMI)
Trailing 12-Month Free Cash Flow Margin: 13.8%
Credited with an invention in the 1950s that improved crop yields, Valmont (NYSE: VMI) provides engineered products and infrastructure services for the agricultural industry.
Why Does VMI Stand Out?
- Operating margin expanded by 4.9 percentage points over the last five years as it scaled and became more efficient
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 18.7% annually
- Free cash flow margin increased by 7.9 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $317.30 per share, Valmont trades at 17.1x 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
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
