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. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
CoStar (CSGP)
Trailing 12-Month Free Cash Flow Margin: 1.3%
With a research department that makes over 10,000 property updates daily to its 35-year-old database, CoStar Group (NASDAQ: CSGP) provides comprehensive real estate data, analytics, and online marketplaces for commercial and residential properties in the U.S. and U.K.
Why Does CSGP Give Us Pause?
- Earnings per share fell by 2.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 13.2 percentage points
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
CoStar is trading at $39.65 per share, or 30.3x forward P/E. Check out our free in-depth research report to learn more about why CSGP doesn’t pass our bar.
Two Stocks to Watch:
Roku (ROKU)
Trailing 12-Month Free Cash Flow Margin: 10.1%
With a name meaning six in Japanese because it was the founder's sixth company that he started, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Why Is ROKU a Good Business?
- Total Hours Streamed are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Free cash flow margin increased by 14.9 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Roku’s stock price of $100.60 implies a valuation ratio of 20.4x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
NetApp (NTAP)
Trailing 12-Month Free Cash Flow Margin: 24%
Founded in 1992 as a pioneer in networked storage technology, NetApp (NASDAQ: NTAP) provides data storage and management solutions that help organizations store, protect, and optimize their data across on-premises data centers and public clouds.
Why Are We Positive On NTAP?
- Billings growth has averaged 7.6% over the past two years, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Adjusted operating margin improvement of 5.4 percentage points over the last five years demonstrates its ability to scale efficiently
- Strong free cash flow margin of 19.4% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $99.37 per share, NetApp trades at 11.6x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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.
