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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may struggle to keep up.
Two Stocks to Sell:
EnerSys (ENS)
Trailing 12-Month Free Cash Flow Margin: 3.6%
Supplying batteries that power equipment as big as mining rigs, EnerSys (NYSE: ENS) manufactures various kinds of batteries for a range of industries.
Why Do We Think Twice About ENS?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.6%
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.2% for the last five years
EnerSys’s stock price of $123.92 implies a valuation ratio of 12.3x forward P/E. To fully understand why you should be careful with ENS, check out our full research report (it’s free for active Edge members).
Zurn Elkay (ZWS)
Trailing 12-Month Free Cash Flow Margin: 17.4%
Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE: ZWS) provides water management solutions to various industries.
Why Do We Steer Clear of ZWS?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings per share decreased by more than its revenue over the last five years, partly because it diluted shareholders
- Free cash flow margin dropped by 5.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Zurn Elkay is trading at $46.65 per share, or 31.3x forward P/E. Dive into our free research report to see why there are better opportunities than ZWS.
One Stock to Buy:
Monolithic Power Systems (MPWR)
Trailing 12-Month Free Cash Flow Margin: 27.8%
Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ: MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.
Why Will MPWR Outperform?
- Market share has increased this cycle as its 29.9% annual revenue growth over the last five years was exceptional
- MPWR is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, 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 $1,034 per share, Monolithic Power Systems trades at 55.4x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Donald Trump’s April 2025 "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 Growth Stocks for this month. 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-small-cap company Exlservice (+354% 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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