While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
The Trade Desk (TTD)
Trailing 12-Month Free Cash Flow Margin: 28.4%
Built as an alternative to "walled garden" advertising ecosystems, The Trade Desk (NASDAQ: TTD) provides a cloud-based platform that helps advertisers and agencies plan, manage, and optimize digital advertising campaigns across multiple channels and devices.
Why Does TTD Worry Us?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 12.2% underwhelmed
- Estimated sales decline of 14.6% for the next 12 months implies a challenging demand environment
- Free cash flow margin is forecasted to shrink by 8.3 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
At $14.29 per share, The Trade Desk trades at 2.6x forward price-to-sales. If you’re considering TTD for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Cardinal Health (CAH)
Trailing 12-Month Free Cash Flow Margin: 1.8%
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE: CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Why Are We Positive on CAH?
- Unparalleled scale of $254.2 billion in revenue gives it negotiating leverage and staying power in an industry with high barriers to entry
- Share repurchases over the last five years enabled its annual earnings per share growth of 14.6% to outpace its revenue gains
Cardinal Health’s stock price of $234.53 implies a valuation ratio of 18.8x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
SM Energy (SM)
Trailing 12-Month Free Cash Flow Margin: 9.5%
Operating across three key regions with over 328,000 net acres under its control, SM Energy (NYSE: SM) explores for, develops, and produces oil, natural gas, and natural gas liquids primarily from shale formations in Texas and Utah.
Why Is SM a Top Pick?
- Impressive 16.7% annual revenue growth over the last ten years indicates it’s winning market share this cycle
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 86.8%
- EBITDA profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
SM Energy is trading at $38.20 per share, or 5.2x 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
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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
