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. That said, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
GoDaddy (GDDY)
Trailing 12-Month Free Cash Flow Margin: 33.4%
Known for its memorable Super Bowl commercials that put it on the map, GoDaddy (NYSE: GDDY) is a domain registrar and web services provider that helps entrepreneurs establish an online presence through domain registration, website building, hosting, and e-commerce tools.
Why Do We Steer Clear of GDDY?
- Average billings growth of 3.6% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 5.9% for the next 12 months implies demand will slow from its two-year trend
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
At $88.99 per share, GoDaddy trades at 2.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than GDDY.
Two Stocks to Watch:
Western Digital (WDC)
Trailing 12-Month Free Cash Flow Margin: 24.7%
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Why Do We Like WDC?
- Sales outlook for the upcoming 12 months calls for 40.2% growth, an acceleration from its two-year trend
- Operating margin improved by 17.3 percentage points over the last five years as it eliminated redundant costs
- Free cash flow margin increased by 17.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Western Digital’s stock price of $529.46 implies a valuation ratio of 31.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Distribution Solutions (DSGR)
Trailing 12-Month Free Cash Flow Margin: 1.4%
Founded in 1952, Distribution Solutions (NASDAQ: DSGR) provides supply chain solutions and distributes industrial, safety, and maintenance products to various industries.
Why Are We Positive On DSGR?
- Annual revenue growth of 38.1% over the last four years was superb and indicates its market share increased during this cycle
- Incremental sales over the last two years boosted profitability as its annual earnings per share growth of 14% outstripped its revenue performance
- Free cash flow margin expanded by 5.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Distribution Solutions is trading at $27.01 per share, or 18.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
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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.
