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.
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 excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
Varonis Systems (VRNS)
Trailing 12-Month Free Cash Flow Margin: 20.8%
Beginning with protecting Windows file shares in 2005 and evolving into a comprehensive security platform, Varonis Systems (NASDAQ: VRNS) provides data security software that helps organizations protect sensitive information, detect threats, and comply with privacy regulations.
Why Is VRNS Not Exciting?
- Annual revenue growth of 11% over the last three years was below our standards for the software sector
- Persistent operating margin losses suggest the business manages its expenses poorly
- Projected 2.9 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
Varonis Systems’s stock price of $57.16 implies a valuation ratio of 9.4x forward price-to-sales. Check out our free in-depth research report to learn more about why VRNS doesn’t pass our bar.
Laureate Education (LAUR)
Trailing 12-Month Free Cash Flow Margin: 14.7%
Founded in 1998 by Douglas L. Becker and based in Miami, Laureate Education (NASDAQ: LAUR) is a global network of higher education institutions.
Why Are We Cautious About LAUR?
- Number of enrolled students has disappointed over the past two years, indicating weak demand for its offerings
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.9% annually
- Low returns on capital reflect management’s struggle to allocate funds effectively
Laureate Education is trading at $29.61 per share, or 17.2x forward P/E. Read our free research report to see why you should think twice about including LAUR in your portfolio.
One Stock to Watch:
Jack Henry (JKHY)
Trailing 12-Month Free Cash Flow Margin: 17.3%
Founded in 1976 by two entrepreneurs who saw the need for specialized banking software in the early days of financial computing, Jack Henry & Associates (NASDAQ: JKHY) provides technology solutions that help banks and credit unions innovate, differentiate, and compete while serving the evolving needs of their accountholders.
Why Should JKHY Be on Your Watchlist?
- Incremental sales were more profitable as its annual earnings per share growth of 11.5% outstripped its revenue performance
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
At $161.66 per share, Jack Henry trades at 25.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% 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
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