A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
CarMax (KMX)
Trailing 12-Month Free Cash Flow Margin: 4.8%
Known for its transparent, customer-centric approach and wide selection of vehicles, Carmax (NYSE: KMX) is the largest automotive retailer in the United States.
Why Are We Out on KMX?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Gross margin of 6% is an output of its commoditized inventory
At $39.15 per share, CarMax trades at 16.2x forward P/E. Check out our free in-depth research report to learn more about why KMX doesn’t pass our bar.
Matson (MATX)
Trailing 12-Month Free Cash Flow Margin: 3.9%
Founded by a Swedish orphan, Matson (NYSE: MATX) is a provider of ocean transportation and logistics services.
Why Is MATX Not Exciting?
- Sales trends were unexciting over the last two years as its 4% annual growth was below the typical industrials company
- 12.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Eroding returns on capital suggest its historical profit centers are aging
Matson is trading at $174.50 per share, or 12.9x forward P/E. Dive into our free research report to see why there are better opportunities than MATX.
One Stock to Buy:
Talos Energy (TALO)
Trailing 12-Month Free Cash Flow Margin: 24.4%
Operating its own deepwater production facilities with names like Tarantula, Pompano, and Brutus, Talos Energy (NYSE: TALO) explores for and produces oil and natural gas from offshore wells in the Gulf of Mexico and offshore Mexico.
Why Will TALO Beat the Market?
- Market share has increased this cycle as its 20.8% annual revenue growth over the last eight years was exceptional
- Highly-profitable operating model results in strong unit economics and a premier gross margin of 72.3%
- Strong free cash flow margin of 18.1% enables it to reinvest or return capital consistently
Talos Energy’s stock price of $15.93 implies a valuation ratio of 493.2x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it's flagging for this month - FREE. Get Our Top 5 Growth 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
