Cash-generating companies often have the flexibility to invest, return capital to shareholders, or navigate downturns. The best of these businesses not only accumulate cash but deploy it strategically for growth.
Even among businesses with healthy cash flow, only a select few maximize its potential, and we’re here to pinpoint them. Keeping that in mind, here are three cash-producing companies that excel at turning cash into shareholder value.
CarGurus (CARG)
Trailing 12-month free cash flow margin: 30.3%
Bringing transparency to a sometimes opaque process, CarGurus (NASDAQ: CARG) is a digital marketplace where auto dealers can connect with potential customers and where car buyers can browse, purchase, and obtain financing.
Why Are We Positive on CARG?
- Customer spending is rising as the company has focused on monetization over the last two years, leading to 8.2% annual growth in its average revenue per user
- Earnings per share have massively outperformed its peers over the last three years, increasing by 32.3% annually
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety
CarGurus is trading at $36.54 per share, or 8.9x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
VSE Corporation (VSEC)
Trailing 12-month free cash flow margin: 1.7%
With roots dating back to 1959 and a strategic focus on extending the life of transportation assets, VSE Corporation (NASDAQ: VSEC) provides aftermarket parts distribution and maintenance, repair, and overhaul services for aircraft and vehicle fleets in commercial and government markets.
Why Should You Buy VSEC?
- Market share has increased this cycle as its 42.6% annual revenue growth over the last two years was exceptional
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Earnings per share grew by 40.8% annually over the last two years, massively outpacing its peers
At $162.59 per share, VSE Corporation trades at 21.4x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
HCA Healthcare (HCA)
Trailing 12-month free cash flow margin: 7.6%
With roots dating back to 1968 and a network spanning 20 states, HCA Healthcare (NYSE: HCA) operates a network of 190 hospitals and 150+ outpatient facilities providing a full range of medical services across the US and England.
Why Are We Fans of HCA?
- Enormous revenue base of $78.7 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Share repurchases over the last five years enabled its annual earnings per share growth of 9% to outpace its revenue gains
- Industry-leading 27.2% return on capital demonstrates management’s skill in finding high-return investments
HCA Healthcare’s stock price of $514.90 implies a valuation ratio of 16.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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