A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
Ducommun (DCO)
Trailing 12-Month Free Cash Flow Margin: 2.9%
California’s oldest company, Ducommun (NYSE: DCO) is a provider of engineering and manufacturing services for high-performance products primarily within the aerospace and defense industries.
Why Do We Avoid DCO?
- Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 4.8% for the past two years was weak
- Poor free cash flow margin of 1.1% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Ducommun’s stock price of $72.35 implies a valuation ratio of 18.9x forward P/E. Dive into our free research report to see why there are better opportunities than DCO.
Bristol-Myers Squibb (BMY)
Trailing 12-Month Free Cash Flow Margin: 27.5%
With roots dating back to 1887 and a transformative merger in 1989 that gave the company its current name, Bristol-Myers Squibb (NYSE: BMY) discovers, develops, and markets prescription medications for serious diseases including cancer, blood disorders, immunological conditions, and cardiovascular diseases.
Why Does BMY Fall Short?
- Sizable revenue base leads to growth challenges as its 1.9% annual revenue increases over the last two years fell short of other healthcare companies
- Estimated sales decline of 4.4% for the next 12 months implies a challenging demand environment
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $48.04 per share, Bristol-Myers Squibb trades at 7.2x forward P/E. Check out our free in-depth research report to learn more about why BMY doesn’t pass our bar.
One Stock to Buy:
Copart (CPRT)
Trailing 12-Month Free Cash Flow Margin: 25.7%
Starting as a single salvage yard in California in 1982, Copart (NASDAQ: CPRT) operates an online auction platform that connects sellers of damaged and salvage vehicles with buyers ranging from dismantlers and rebuilders to used car dealers and exporters.
Why Do We Love CPRT?
- Annual revenue growth of 15.6% over the past five years was outstanding, reflecting market share gains this cycle
- Additional sales over the last five years increased its profitability as the 19.6% annual growth in its earnings per share outpaced its revenue
- Robust free cash flow margin of 23% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
Copart is trading at $50.35 per share, or 29.3x forward P/E. Is now a good time to buy? Find out 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 5 Strong Momentum 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
