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. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
Affirm (AFRM)
Trailing 12-Month Free Cash Flow Margin: 19.8%
Founded by PayPal co-founder Max Levchin with a mission to create honest financial products, Affirm (NASDAQ: AFRM) provides a payment network that allows consumers to make purchases and pay for them over time with transparent, flexible installment loans.
Why Does AFRM Fall Short?
- Negative return on equity shows that some of its growth strategies have backfired
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Affirm’s stock price of $68.40 implies a valuation ratio of 17.7x forward P/E. Check out our free in-depth research report to learn more about why AFRM doesn’t pass our bar.
Northern Oil and Gas (NOG)
Trailing 12-Month Free Cash Flow Margin: 13.8%
Taking the path less traveled in the oil industry by choosing not to operate its own wells, Northern Oil and Gas (NYSE: NOG) acquires minority stakes in oil and gas wells operated by other companies across major U.S. shale basins.
Why Are We Cautious About NOG?
- Costs have risen faster than its revenue over the last five years, causing its EBITDA margin to decline by 3.2 percentage points
Northern Oil and Gas is trading at $21.80 per share, or 5.3x forward P/E. If you’re considering NOG for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Lennox (LII)
Trailing 12-Month Free Cash Flow Margin: 12.8%
Based in Texas and founded over a century ago, Lennox (NYSE: LII) is a climate control solutions company offering heating, ventilation, air conditioning, and refrigeration (HVACR) goods.
Why Are We Fans of LII?
- Operating margin expanded by 5.2 percentage points over the last five years as it scaled and became more efficient
- Free cash flow margin increased by 4.7 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Industry-leading 37.8% return on capital demonstrates management’s skill in finding high-return investments
At $518.13 per share, Lennox trades at 20.7x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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.
