A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 best left off your watchlist.
One Stock to Sell:
Connection (CNXN)
Trailing 12-Month Free Cash Flow Margin: 4.3%
Starting as a small computer products seller in 1982 and evolving into a Fortune 1000 company, Connection (NASDAQ: CNXN) is a technology solutions provider that helps businesses and government agencies design, purchase, implement, and manage their IT infrastructure and systems.
Why Are We Cautious About CNXN?
- 2.5% annual revenue growth over the last two years was slower than its business services peers
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 6.9% annually
- Poor free cash flow margin of 3.4% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $63.67 per share, Connection trades at 17.2x forward P/E. Dive into our free research report to see why there are better opportunities than CNXN.
Two Stocks to Watch:
Merck (MRK)
Trailing 12-Month Free Cash Flow Margin: 21.5%
With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE: MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.
Why Does MRK Stand Out?
- Dominant market position is represented by its $65.77 billion in revenue, which creates significant barriers to entry in this highly regulated industry
- Adjusted operating margin expanded by 14.5 percentage points over the last two years as it scaled and became more efficient
- Strong free cash flow margin of 21.9% enables it to reinvest or return capital consistently
Merck’s stock price of $112.44 implies a valuation ratio of 18.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Sezzle (SEZL)
Trailing 12-Month Free Cash Flow Margin: 51%
Founded in 2016 as an alternative to traditional credit cards for younger shoppers, Sezzle (NASDAQ: SEZL) provides a payment platform that allows consumers to split purchases into four interest-free installments over six weeks at participating retailers.
Why Is SEZL a Top Pick?
- Annual revenue growth of 67.4% over the last two years was superb and indicates its market share increased during this cycle
- Earnings per share grew by 65% annually over the last one years and trumped its peers
Sezzle is trading at $98.32 per share, or 18.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum - both boxes checked at the same time.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
