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 is one cash-producing company that excels at turning cash into shareholder value and two that may struggle to keep up.
Two Stocks to Sell:
Concentrix (CNXC)
Trailing 12-Month Free Cash Flow Margin: 5%
With a team of approximately 450,000 employees across 75 countries, Concentrix (NASDAQ:CNXC) designs and delivers customer experience solutions that help global brands manage their customer interactions across digital channels and contact centers.
Why Is CNXC Not Exciting?
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Performance over the past two years shows its incremental sales were less profitable, as its 2.5% annual earnings per share growth trailed its revenue gains
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
At $49.77 per share, Concentrix trades at 4.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why CNXC doesn’t pass our bar.
Omnicom Group (OMC)
Trailing 12-Month Free Cash Flow Margin: 9%
With a vast network of creative agencies that helped craft some of the most memorable ad campaigns in history, Omnicom Group (NYSE:OMC) is a strategic holding company that provides advertising, marketing, and communications services to many of the world's largest companies.
Why Are We Cautious About OMC?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its two-year trend
- Free cash flow margin shrank by 7.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Omnicom Group’s stock price of $73.52 implies a valuation ratio of 8.6x forward price-to-earnings. If you’re considering OMC for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
MACOM (MTSI)
Trailing 12-Month Free Cash Flow Margin: 21.9%
Founded in the 1950s as Microwave Associates, a communications supplier to the US Army Signal Corp, today MACOM Technology Solutions (NASDAQ: MTSI) is a provider of analog chips used in optical, wireless, and satellite networks.
Why Do We Like MTSI?
- 6.6% annual revenue growth over the last two years surpassed the sector average as its products resonated with customers
- Projected revenue growth of 21.1% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings per share grew by 49.2% annually over the last five years, massively outpacing its peers
MACOM is trading at $102.15 per share, or 27.7x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.