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 leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
Iridium (IRDM)
Trailing 12-Month Free Cash Flow Margin: 33.9%
With a constellation of 66 low-earth orbit satellites providing coverage to every inch of the planet, Iridium Communications (NASDAQ:IRDM) operates a global satellite network that provides voice and data services to customers in remote areas where traditional telecommunications are unavailable.
Why Are We Cautious About IRDM?
- Subscale operations are evident in its revenue base of $841.7 million, meaning it has fewer distribution channels than its larger rivals
- 3.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Underwhelming 4.4% return on capital reflects management’s difficulties in finding profitable growth opportunities
Iridium’s stock price of $33 implies a valuation ratio of 21.8x forward P/E. Dive into our free research report to see why there are better opportunities than IRDM.
Insight Enterprises (NSIT)
Trailing 12-Month Free Cash Flow Margin: 4.9%
With over 35 years of IT expertise and partnerships with more than 8,000 technology providers, Insight Enterprises (NASDAQ:NSIT) provides end-to-end digital transformation solutions that help businesses modernize their IT infrastructure and maximize the value of technology.
Why Do We Steer Clear of NSIT?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 8.7% annually over the last two years
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 1.6% annually
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $139.39 per share, Insight Enterprises trades at 13.9x forward P/E. If you’re considering NSIT for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Blue Bird (BLBD)
Trailing 12-Month Free Cash Flow Margin: 6.4%
With around a century of experience, Blue Bird (NASDAQ:BLBD) is a manufacturer of school buses and complementary parts.
Why Is BLBD a Top Pick?
- Market share has increased this cycle as its 16.5% annual revenue growth over the last two years was exceptional
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 156% annually, topping its revenue gains
- Returns on capital are growing as management capitalizes on its market opportunities
Blue Bird is trading at $42.33 per share, or 10x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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