A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 reinvest wisely to drive long-term success and one best left off your watchlist.
One Stock to Sell:
Covenant Logistics (CVLG)
Trailing 12-Month Free Cash Flow Margin: 4.4%
Started with 25 trucks and 50 trailers, Covenant Logistics (NASDAQ: CVLG) is a provider of expedited long haul freight services, offering a range of logistics solutions.
Why Do We Steer Clear of CVLG?
- Muted 3.8% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 15.7% annually while its revenue grew
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Covenant Logistics is trading at $43.21 per share, or 0.9x forward price-to-sales. Check out our free in-depth research report to learn more about why CVLG doesn’t pass our bar.
Two Stocks to Watch:
Nextpower (NXT)
Trailing 12-Month Free Cash Flow Margin: 14.4%
With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dhabi solar farm project, Nextpower (NASDAQ: NXT) is a provider of solar tracker systems that help solar panels follow the sun.
Why Are We Backing NXT?
- Annual revenue growth of 19.3% over the last two years was superb and indicates its market share increased during this cycle
- Free cash flow margin expanded by 25.3 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Improving returns on capital reflect management’s ability to monetize investments
Nextpower’s stock price of $147.96 implies a valuation ratio of 32.4x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Zoetis (ZTS)
Trailing 12-Month Free Cash Flow Margin: 23.8%
Originally spun off from Pfizer in 2013 as the world's largest pure-play animal health company, Zoetis (NYSE: ZTS) discovers, develops, and sells medicines, vaccines, diagnostic products, and services for pets and livestock animals worldwide.
Why Do We Like ZTS?
- Business is well-positioned no matter the global macroeconomic backdrop as its constant currency revenue growth averaged 8.7% over the past two years
- Robust free cash flow margin of 21.3% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
At $79.88 per share, Zoetis trades at 11.1x 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.
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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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
