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.
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:
SS&C (SSNC)
Trailing 12-Month Free Cash Flow Margin: 22.8%
Founded in 1986 as a bridge between technology and financial services, SS&C Technologies (NASDAQ: SSNC) provides software and software-enabled services that help financial firms and healthcare organizations automate complex business processes.
Why Does SSNC Worry Us?
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 1.3 percentage points
- Free cash flow margin shrank by 2.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- ROIC of 6.8% reflects management’s challenges in identifying attractive investment opportunities
SS&C is trading at $68.72 per share, or 9.7x forward P/E. If you’re considering SSNC for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Roku (ROKU)
Trailing 12-Month Free Cash Flow Margin: 10.8%
With a name meaning six in Japanese because it was the founder's sixth company that he started, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Why Should You Buy ROKU?
- Total Hours Streamed have grown by 15.5% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 31.8% outpaced its revenue gains
- Free cash flow margin jumped by 25 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Roku’s stock price of $124.81 implies a valuation ratio of 22.4x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Astec (ASTE)
Trailing 12-Month Free Cash Flow Margin: 2.5%
Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ: ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.
Why Do We Like ASTE?
- Estimated revenue growth of 12.9% for the next 12 months implies demand will accelerate from its two-year trend
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 18.5% outpaced its revenue gains
At $51.57 per share, Astec trades at 12.9x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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