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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that excels at turning cash into shareholder value and two that may struggle to keep up.
Two Stocks to Sell:
Agilysys (AGYS)
Trailing 12-Month Free Cash Flow Margin: 24.4%
With a tech stack that powers everything from check-in to checkout at some of the world's top hospitality venues, Agilysys (NASDAQ: AGYS) develops and provides cloud-based and on-premise software solutions for hotels, resorts, casinos, and restaurants to manage operations and enhance guest experiences.
Why Does AGYS Worry Us?
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 63.1%
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 4.8 percentage points
At $108.64 per share, Agilysys trades at 7.9x forward price-to-sales. If you’re considering AGYS for your portfolio, see our FREE research report to learn more.
Lowe's (LOW)
Trailing 12-Month Free Cash Flow Margin: 8.6%
Founded in North Carolina as Lowe's North Wilkesboro Hardware, the company is a home improvement retailer that sells everything from paint to tools to building materials.
Why Does LOW Give Us Pause?
- Products aren’t resonating with the market as its revenue declined by 2.6% annually over the last three years
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Gross margin of 33.3% is below its competitors, leaving less money for marketing and promotions
Lowe’s stock price of $223.20 implies a valuation ratio of 17.2x forward P/E. Check out our free in-depth research report to learn more about why LOW doesn’t pass our bar.
One Stock to Buy:
Netflix (NFLX)
Trailing 12-Month Free Cash Flow Margin: 23.1%
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
Why Will NFLX Outperform?
- Global Streaming Paid Memberships are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Excellent EBITDA margin of 31.2% highlights the efficiency of its business model, and its operating leverage amplified its profits over the last few years
- Share repurchases over the last three years enabled its annual earnings per share growth of 50% to outpace its revenue gains
Netflix is trading at $74.17 per share, or 17.2x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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.
