Businesses with strong free cash flow tend to be more adaptable and resilient. Some of these companies shine bright by using their cash wisely to strengthen their market positions.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are three cash-producing companies that leverage their financial strength to beat the competition.
Allison Transmission (ALSN)
Trailing 12-Month Free Cash Flow Margin: 16.7%
Helping build race cars at one point, Allison Transmission (NYSE: ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Do We Like ALSN?
- Market share has increased this cycle as its 12.4% annual revenue growth over the last five years was exceptional
- Share repurchases over the last five years enabled its annual earnings per share growth of 21.5% to outpace its revenue gains
- Robust free cash flow margin of 19.2% gives it many options for capital deployment
Allison Transmission is trading at $119.40 per share, or 10.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
McKesson (MCK)
Trailing 12-Month Free Cash Flow Margin: 1.3%
With roots dating back to 1833, making it one of America's oldest continuously operating businesses, McKesson (NYSE: MCK) is a healthcare services company that distributes pharmaceuticals, medical supplies, and provides technology solutions to pharmacies, hospitals, and healthcare providers.
Why Will MCK Outperform?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 14.3% annual sales growth over the last two years
- Enormous revenue base of $403.4 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
At $735.75 per share, McKesson trades at 16.6x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Medpace (MEDP)
Trailing 12-Month Free Cash Flow Margin: 26.5%
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ: MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Why Could MEDP Be a Winner?
- Average organic revenue growth of 16.9% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin increased by 8.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Medpace’s stock price of $449.11 implies a valuation ratio of 25.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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