A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
FactSet (FDS)
Trailing 12-Month Free Cash Flow Margin: 28.4%
Founded in 1978 when financial data was still primarily delivered through paper reports, FactSet (NYSE: FDS) provides financial data, analytics, and technology solutions that investment professionals use to research, analyze, and manage their portfolios.
Why Are We Cautious About FDS?
- Sales trends were unexciting over the last two years as its 5.6% annual growth was below the typical financials company
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 7.1% annually
At $208.03 per share, FactSet trades at 11.7x forward P/E. Check out our free in-depth research report to learn more about why FDS doesn’t pass our bar.
Lemonade (LMND)
Trailing 12-Month Free Cash Flow Margin: 2.3%
Built on the principle of giving back unused premiums to charitable causes selected by policyholders, Lemonade (NYSE: LMND) is a technology-driven insurance company that offers homeowners, renters, pet, car, and life insurance through an AI-powered digital platform.
Why Does LMND Give Us Pause?
- Incremental sales over the last two years were less profitable as its 17% annual earnings per share growth lagged its revenue gains
- Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 18.4% annually over the last five years
- Negative return on equity shows management lost money while trying to expand the business
Lemonade’s stock price of $55.92 implies a valuation ratio of 9.2x forward P/B. Read our free research report to see why you should think twice about including LMND in your portfolio.
One Stock to Watch:
Dynatrace (DT)
Trailing 12-Month Free Cash Flow Margin: 26.2%
With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE: DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.
Why Are We Fans of DT?
- Billings growth has averaged 24% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Prominent and differentiated software results in a top-tier gross margin of 81.7%
- DT is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Dynatrace is trading at $40.98 per share, or 5.2x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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.
