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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
BlackLine (BL)
Trailing 12-Month Free Cash Flow Margin: 19.3%
Born from the vision to eliminate tedious manual spreadsheet work for accountants, BlackLine (NASDAQ: BL) provides cloud-based software that automates and streamlines financial close, intercompany accounting, and invoice-to-cash processes for accounting departments.
Why Are We Out on BL?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 8.5% underwhelmed
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Operating margin didn’t move over the last year, showing it couldn’t increase its efficiency
At $28.45 per share, BlackLine trades at 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why BL doesn’t pass our bar.
Two Stocks to Watch:
Airbnb (ABNB)
Trailing 12-Month Free Cash Flow Margin: 35.9%
Founded by Brian Chesky and Joe Gebbia in their San Francisco apartment, Airbnb (NASDAQ: ABNB) is the world’s largest online marketplace for lodging, primarily homestays.
Why Will ABNB Beat the Market?
- Nights and Experiences Booked have increased by an average of 9.1% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Healthy EBITDA margin of 35.3% shows it’s a well-run company with efficient processes, and its profits increased over the last few years as it scaled
- Strong free cash flow margin of 37.2% enables it to reinvest or return capital consistently
Airbnb’s stock price of $140.72 implies a valuation ratio of 15.2x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
WD-40 (WDFC)
Trailing 12-Month Free Cash Flow Margin: 11.8%
Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQ: WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.
Why Is WDFC on Our Radar?
- Differentiated product offerings are difficult to replicate at scale and result in a premier gross margin of 55.4%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its rising returns show it’s making even more lucrative bets
WD-40 is trading at $231.33 per share, or 38.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
