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2 Cash-Producing Stocks to Consider Right Now and 1 We Find Risky
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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one that may struggle to keep up.
One Stock to Sell:
Meritage Homes (MTH)
Trailing 12-Month Free Cash Flow Margin: 7.7%
Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE:MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.
Why Are We Out on MTH?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 27.6% declines over the past two years
- Earnings per share have contracted by 7.7% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- Eroding returns on capital suggest its historical profit centers are aging
Meritage Homes’s stock price of $71.78 implies a valuation ratio of 13x forward P/E. If you’re considering MTH for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
MSA Safety (MSA)
Trailing 12-Month Free Cash Flow Margin: 18.2%
Founded in 1914 as Mine Safety Appliances to protect coal miners from dangerous gases, MSA Safety (NYSE:MSA) designs and manufactures advanced safety products that protect workers and facilities across industries including fire service, energy, construction, and manufacturing.
Why Could MSA Be a Winner?
- Adjusted operating margin improvement of 4.3 percentage points over the last five years demonstrates its ability to scale efficiently
- Share repurchases over the last five years enabled its annual earnings per share growth of 15.6% to outpace its revenue gains
- Free cash flow margin increased by 10.5 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $189.34 per share, MSA Safety trades at 19.7x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
McKesson (MCK)
Trailing 12-Month Free Cash Flow Margin: 1.5%
With roots dating back to 1833, making it one of America's oldest continuously operating businesses, McKesson (NYSE:MCK) is a healthcare services company that distributes pharmaceuticals, medical supplies, and provides technology solutions to pharmacies, hospitals, and healthcare providers.
Why Is MCK a Good Business?
- 14.5% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers
- Massive revenue base of $411 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
- Share repurchases over the last five years enabled its annual earnings per share growth of 15.3% to outpace its revenue gains
McKesson is trading at $859.91 per share, or 18x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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 Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.