While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
Teladoc (TDOC)
Trailing 12-Month Free Cash Flow Margin: 11.5%
Founded to help people in rural areas get online medical consultations, Teladoc Health (NYSE: TDOC) is a telemedicine platform that facilitates remote doctor’s visits.
Why Are We Hesitant About TDOC?
- Sales trends were unexciting over the last three years as its 4.4% annual growth was below the typical consumer internet company
- Decision to emphasize platform growth over monetization has contributed to 7.1% annual declines in its average revenue per user
- Projected sales are flat for the next 12 months, implying demand will slow from its three-year trend
Teladoc is trading at $7.71 per share, or 4.7x forward EV/EBITDA. To fully understand why you should be careful with TDOC, check out our full research report (it’s free).
National Vision (EYE)
Trailing 12-Month Free Cash Flow Margin: 3%
Operating under multiple brands, National Vision (NYSE: EYE) sells optical products such as eyeglasses and provides optical services such as eye exams.
Why Is EYE Not Exciting?
- Store closures demonstrate a defensive approach to eliminating underperforming locations
- Poor expense management has led to an operating margin of 0.6% that is below the industry average
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
National Vision’s stock price of $23.12 implies a valuation ratio of 28.6x forward P/E. Dive into our free research report to see why there are better opportunities than EYE.
One Stock to Buy:
Morningstar (MORN)
Trailing 12-Month Free Cash Flow Margin: 16.6%
Founded in 1984 by Joe Mansueto with just $80,000 in personal savings, Morningstar (NASDAQ: MORN) provides independent investment data, research, and analysis tools that help investors, advisors, and institutions make informed financial decisions.
Why Will MORN Beat the Market?
- 12.7% annual revenue growth over the last five years surpassed the sector average as its products resonated with customers
- Additional sales over the last two years increased its profitability as the 321% annual growth in its earnings per share outpaced its revenue
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
At $262.42 per share, Morningstar trades at 28x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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