A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here are two cash-producing companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
Nordson (NDSN)
Trailing 12-Month Free Cash Flow Margin: 19.5%
Founded in 1954, Nordson Corporation (NASDAQ: NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.
Why Does NDSN Worry Us?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Earnings per share lagged its peers over the last two years as they only grew by 1.2% annually
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Nordson’s stock price of $223.17 implies a valuation ratio of 20.7x forward P/E. To fully understand why you should be careful with NDSN, check out our full research report (it’s free).
Two Stocks to Watch:
Ingersoll Rand (IR)
Trailing 12-Month Free Cash Flow Margin: 17.6%
Started with the invention of the steam drill, Ingersoll Rand (NYSE: IR) provides mission-critical air, gas, liquid, and solid flow creation solutions.
Why Do We Like IR?
- Operating margin expanded by 6.7 percentage points over the last five years as it scaled and became more efficient
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Strong free cash flow margin of 15.4% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
Ingersoll Rand is trading at $80.06 per share, or 22.4x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
UL Solutions (ULS)
Trailing 12-Month Free Cash Flow Margin: 12.3%
Founded in 1894 as a response to the growing dangers of electricity in American homes and businesses, UL Solutions (NYSE: ULS) provides testing, inspection, and certification services that help companies ensure their products meet safety, security, and sustainability standards.
Why Is ULS Interesting?
- Solid 7.2% annual revenue growth over the last two years indicates its offering’s solve complex business issues
- Free cash flow margin jumped by 4.8 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
At $66.75 per share, UL Solutions trades at 36.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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