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. That said, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may face some trouble.
One Stock to Sell:
Paycor (PYCR)
Trailing 12-Month Free Cash Flow Margin: 9.1%
Founded in 1990 in Cincinnati, Ohio, Paycor (NASDAQ: PYCR) provides software for small businesses to manage their payroll and HR needs in one place.
Why Are We Hesitant About PYCR?
- Estimated sales growth of 9.6% for the next 12 months implies demand will slow from its three-year trend
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 66%
- Persistent operating margin losses suggest the business manages its expenses poorly
Paycor’s stock price of $22.49 implies a valuation ratio of 5.3x forward price-to-sales. Read our free research report to see why you should think twice about including PYCR in your portfolio.
Two Stocks to Watch:
Huron (HURN)
Trailing 12-Month Free Cash Flow Margin: 12.3%
Founded in 2002 during a time of significant regulatory change in corporate America, Huron Consulting Group (NASDAQ: HURN) is a professional services company that helps organizations develop growth strategies, optimize operations, and implement digital transformation solutions.
Why Do We Like HURN?
- Impressive 13.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Adjusted operating margin profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share buybacks catapulted its annual earnings per share growth to 34.6%, which outperformed its revenue gains over the last two years
At $135.43 per share, Huron trades at 18.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Ibotta (IBTA)
Trailing 12-Month Free Cash Flow Margin: 28.1%
Originally launched as a way to make grocery shopping more rewarding for budget-conscious consumers, Ibotta (NYSE: IBTA) is a mobile shopping app that allows consumers to earn cash back on everyday purchases by completing tasks and submitting receipts.
Why Is IBTA a Top Pick?
- Number of total redemptions has surged, pointing to elevated demand
- Forecasted revenue growth of 7.5% for the next 12 months indicates its momentum over the last two years is sustainable
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 53.4% annually, topping its revenue gains
Ibotta is trading at $36.99 per share, or 11.7x forward EV-to-EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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