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1 Cash-Producing Stock to Consider Right Now and 2 We Avoid
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. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may face some trouble.
Two Stocks to Sell:
Dollar Tree (DLTR)
Trailing 12-Month Free Cash Flow Margin: 4.5%
A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ:DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.
Why Does DLTR Fall Short?
- Sales tumbled by 11.9% annually over the last three years, showing consumer trends are working against its favor
- Conservative approach to adding new stores shows management is focused on improving existing location performance
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $123.87 per share, Dollar Tree trades at 19.3x forward P/E. Dive into our free research report to see why there are better opportunities than DLTR.
XPO (XPO)
Trailing 12-Month Free Cash Flow Margin: 4.7%
Owning a mobile game simulating freight operations for the Tour de France, XPO (NYSE:XPO) is a transportation company specializing in expedited shipping services.
Why Do We Think XPO Will Underperform?
- Sales tumbled by 1.4% annually over the last five years, showing market trends are working against its favor during this cycle
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 14.7%
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.2 percentage points
XPO is trading at $135.70 per share, or 32.5x forward P/E. Read our free research report to see why you should think twice about including XPO in your portfolio.
One Stock to Watch:
Snap (SNAP)
Trailing 12-Month Free Cash Flow Margin: 7.2%
Founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, and originally called Picaboo, Snapchat (NYSE: SNAP) is an image centric social media network.
Why Do We Like SNAP?
- Has the opportunity to boost monetization through new features and premium offerings as its daily active users have grown by 9.1% annually over the last two years
- Reputation gives it word-of-mouth marketing, allowing it to acquire new users efficiently
- Highly efficient business model is illustrated by its impressive 9.1% EBITDA margin
Snap’s stock price of $8.01 implies a valuation ratio of 16.5x forward EV/EBITDA. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today.