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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
Carriage Services (CSV)
Trailing 12-Month Free Cash Flow Margin: 10.1%
Established in 1991, Carriage Services (NYSE: CSV) is a provider of funeral and cemetery services in the United States.
Why Are We Out on CSV?
- Muted 3.6% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 10.4% for the last two years
- Stagnant returns on capital show management has failed to improve the company’s business quality
At $37.55 per share, Carriage Services trades at 10.9x forward P/E. To fully understand why you should be careful with CSV, check out our full research report (it’s free).
AECOM (ACM)
Trailing 12-Month Free Cash Flow Margin: 2.6%
Founded in 1990 when a group of engineers from five companies decided to merge, AECOM (NYSE: ACM) provides various infrastructure consulting services.
Why Do We Think Twice About ACM?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 2% declines over the past two years
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4%
- Free cash flow margin dropped by 3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
AECOM’s stock price of $70.10 implies a valuation ratio of 11.4x forward P/E. Check out our free in-depth research report to learn more about why ACM doesn’t pass our bar.
One Stock to Buy:
Take-Two (TTWO)
Trailing 12-Month Free Cash Flow Margin: 6.9%
Best known for its Grand Theft Auto and NBA 2K franchises, Take Two (NASDAQ: TTWO) is one of the world’s largest video game publishers.
Why Is TTWO a Good Business?
- Exciting sales outlook for the upcoming 12 months calls for 26.3% growth, an acceleration from its three-year trend
- Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 38.1% annually
- Free cash flow margin increased by 10.7 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Take-Two is trading at $239.49 per share, or 26.5x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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.
