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. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
Smith & Wesson (SWBI)
Trailing 12-Month Free Cash Flow Margin: 17.3%
With a history dating back to 1852, Smith & Wesson (NASDAQ: SWBI) is a firearms manufacturer known for its handguns and rifles.
Why Do We Think SWBI Will Underperform?
- Annual sales declines of 13.1% for the past five years show its products and services struggled to connect with the market
- Low free cash flow margin of 6.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Smith & Wesson’s stock price of $14.74 implies a valuation ratio of 32.3x forward P/E. Check out our free in-depth research report to learn more about why SWBI doesn’t pass our bar.
Two Stocks to Watch:
Urban Outfitters (URBN)
Trailing 12-Month Free Cash Flow Margin: 2.4%
Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ: URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.
Why Are We Fans of URBN?
- Offensive push to build new stores and attack its untapped market opportunities is backed by its same-store sales growth
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 4.8% over the past two years
- Share repurchases over the last three years enabled its annual earnings per share growth of 42.4% to outpace its revenue gains
At $74.98 per share, Urban Outfitters trades at 11.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Cigna (CI)
Trailing 12-Month Free Cash Flow Margin: 2.8%
With roots dating back to 1792 and serving millions of customers across the globe, The Cigna Group (NYSE: CI) provides healthcare services through its Evernorth Health Services and Cigna Healthcare segments, offering pharmacy benefits, specialty care, and medical plans.
Why Are We Positive on CI?
- Solid 16.1% annual revenue growth over the last two years indicates its offerings solve complex business issues
- Dominant market position is represented by its $277.7 billion in revenue, which gives it negotiating power over membership pricing and reimbursement rates
- Earnings growth has comfortably beaten the peer group average over the last five years as its EPS has compounded at 10.9% annually
Cigna is trading at $286.30 per share, or 9.4x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
