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 reinvest wisely to drive long-term success and one that may struggle to keep up.
One Stock to Sell:
Celsius (CELH)
Trailing 12-Month Free Cash Flow Margin: 12.9%
With its proprietary MetaPlus formula as the basis for key products, Celsius (NASDAQ: CELH) offers energy drinks that feature natural ingredients to help in fitness and weight management.
Why Is CELH Not Exciting?
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 5.9 percentage points
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 4.8 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively
Celsius is trading at $35.03 per share, or 21.7x forward P/E. Check out our free in-depth research report to learn more about why CELH doesn’t pass our bar.
Two Stocks to Watch:
CACI (CACI)
Trailing 12-Month Free Cash Flow Margin: 7.1%
Founded to commercialize SIMSCRIPT, CACI International (NYSE: CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
Why Does CACI Stand Out?
- Impressive 12.2% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Share repurchases over the last two years enabled its annual earnings per share growth of 22.2% to outpace its revenue gains
At $534.03 per share, CACI trades at 17.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Gulfport Energy (GPOR)
Trailing 12-Month Free Cash Flow Margin: 19.4%
With drilling operations focused on the Utica Shale in eastern Ohio and the SCOOP play in central Oklahoma, Gulfport Energy (NYSE: GPOR) drills for and produces natural gas from underground shale formations.
Why Could GPOR Be a Winner?
- Annual revenue growth of 7.2% over the last ten years was superb and indicates its market share increased during this cycle
- Attractive asset base leads to wonderful unit economics and a premier gross margin of 68.6%
- GPOR is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Gulfport Energy’s stock price of $193.28 implies a valuation ratio of 7.4x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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