Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may struggle to keep up.
One stock to sell:
Leidos (LDOS)
Trailing 12-month free cash flow margin: 11%
Formed through the split of IT services company SAIC, Leidos (NYSE: LDOS) offers technology and engineering solutions such as military training systems for the defense, civil, and health markets.
Why Does LDOS Give Us Pause?
- Annual sales growth of 4.6% over the last two years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Estimated sales growth of 2.7% for the next 12 months implies demand will slow from its two-year trend
Leidos’s stock price of $135.66 implies a valuation ratio of 11.5x forward P/E. To fully understand why you should be careful with LDOS, check out our full research report (it’s free).
Two stocks to buy:
Remitly (RELY)
Trailing 12-month free cash flow margin: 23.4%
With Amazon founder Jeff Bezos as an early investor, Remitly (NASDAQ: RELY) is an online platform that enables consumers to safely and quickly send money globally.
What Makes RELY Stand Out?
- Active Customers have increased by an average of 24.3% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Additional sales over the last three years increased its profitability as the 134% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin increased by 34.9 percentage points over the last few years, giving the company more capital to invest or return to shareholders
At $21.88 per share, Remitly trades at 11.1x forward EV/EBITDA. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
SM Energy (SM)
Trailing 12-month free cash flow margin: 15.8%
Operating across three key regions with over 328,000 net acres under its control, SM Energy (NYSE: SM) explores for, develops, and produces oil, natural gas, and natural gas liquids primarily from shale formations in Texas and Utah.
Why Is SM a Good Business?
- Market share has increased this cycle as its 19.7% annual revenue growth over the last ten years was exceptional
- Enormous revenue base of $6.85 billion provides significant leverage in supplier negotiations
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 86.2%
SM Energy is trading at $29.82 per share, or 3.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks we like even more
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.
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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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
