2 Cash-Producing Stocks with Promising Prospects and 1 We Question
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 face some trouble.
One Stock to Sell:
Generac (GNRC)
Trailing 12-Month Free Cash Flow Margin: 7.6%
With its name deriving from a combination of “generating” and “AC”, Generac (NYSE:GNRC) offers generators and other power products for residential, industrial, and commercial use.
Why Are We Cautious About GNRC?
- Sales trends were unexciting over the last two years as its 3.7% annual growth was below the typical industrials company
- Earnings per share have contracted by 2.9% 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
At $215.86 per share, Generac trades at 23.1x forward P/E. If you’re considering GNRC for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Micron (MU)
Trailing 12-Month Free Cash Flow Margin: 29%
Founded in the basement of a Boise, Idaho dental office in 1978, Micron (NASDAQ:MU) is a leading provider of memory chips used in thousands of devices across mobile, data centers, industrial, consumer, and automotive markets.
Why Is MU a Good Business?
- Market share has increased this cycle as its 106% annual revenue growth over the last two years was exceptional
- Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 57.1% outpaced its revenue gains
- Free cash flow margin grew by 14.1 percentage points over the last five years, giving the company more chips to play with
Micron’s stock price of $986.63 implies a valuation ratio of 6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Toast (TOST)
Trailing 12-Month Free Cash Flow Margin: 10.1%
Born from the frustrations of three friends waiting too long for their restaurant bill, Toast (NYSE:TOST) provides a cloud-based digital technology platform with software, payment processing, and hardware solutions built specifically for restaurants.
Why Do We Like TOST?
- ARR growth averaged 28% over the last year, showing customers are willing to take multi-year bets on its software
- Estimated revenue growth of 19.8% for the next 12 months implies its momentum over the last two years will continue
Toast is trading at $30.29 per share, or 2.4x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.