A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.
Two Stocks to Sell:
DNOW (DNOW)
Trailing 12-Month Free Cash Flow Margin: 7.3%
Spun off from National Oilwell Varco, DNOW (NYSE: DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.
Why Are We Wary of DNOW?
- Sales trends were unexciting over the last two years as its 2.5% annual growth was below the typical industrials company
- High input costs result in an inferior gross margin of 22.7% that must be offset through higher volumes
- Flat earnings per share over the last two years underperformed the sector average
DNOW is trading at $16.14 per share, or 0.3x forward price-to-sales. To fully understand why you should be careful with DNOW, check out our full research report (it’s free).
Chemed (CHE)
Trailing 12-Month Free Cash Flow Margin: 14.2%
With a unique business model combining end-of-life care and household services, Chemed (NYSE: CHE) operates two distinct businesses: VITAS, which provides hospice care for terminally ill patients, and Roto-Rooter, which offers plumbing and water restoration services.
Why Is CHE Not Exciting?
- Sales trends were unexciting over the last five years as its 4.1% annual growth was below the typical healthcare company
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 4.3 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $473.11 per share, Chemed trades at 18.9x forward P/E. Dive into our free research report to see why there are better opportunities than CHE.
One Stock to Watch:
Travelers (TRV)
Trailing 12-Month Free Cash Flow Margin: 21.7%
Tracing its roots back to 1853 when it insured travelers against accidents on steamboats and railroads, Travelers (NYSE: TRV) provides a wide range of commercial and personal property and casualty insurance products to businesses, government units, associations, and individuals.
Why Could TRV Be a Winner?
- Underwriting operating profits and efficiency rose over the last two years as it benefited from some fixed cost leverage
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 45.2% exceeded its revenue gains over the last two years
- Capital generation for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust book value per share growth of 19.3%
Travelers’s stock price of $298.37 implies a valuation ratio of 1.7x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out 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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
