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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, 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:
Q2 Holdings (QTWO)
Trailing 12-Month Free Cash Flow Margin: 20%
With a platform powering digital services for approximately 25 million account holders across America, Q2 Holdings (NYSE: QTWO) provides cloud-based digital solutions that help financial institutions, fintechs, and alternative finance companies deliver modern banking experiences to their customers.
Why Does QTWO Fall Short?
- Underwhelming ARR growth of 11.3% over the last year suggests the company faced challenges in acquiring and retaining long-term customers
- Estimated sales growth of 10.7% for the next 12 months implies demand will slow from its two-year trend
- Gross margin of 53.4% is way below its competitors, leaving less money to invest in areas like marketing and R&D
Q2 Holdings’s stock price of $74.16 implies a valuation ratio of 6.1x forward price-to-sales. Read our free research report to see why you should think twice about including QTWO in your portfolio.
Cable One (CABO)
Trailing 12-Month Free Cash Flow Margin: 19.8%
Founded in 1986, Cable One (NYSE: CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.
Why Should You Dump CABO?
- Sluggish trends in its residential data subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Free cash flow margin is on track to jump by 1.4 percentage points next year, meaning the company will have more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $115.97 per share, Cable One trades at 3.2x forward P/E. Dive into our free research report to see why there are better opportunities than CABO.
One Stock to Watch:
Globus Medical (GMED)
Trailing 12-Month Free Cash Flow Margin: 20.9%
With operations spanning 64 countries and a portfolio of over 10 new products launched in 2023 alone, Globus Medical (NYSE: GMED) develops and sells implantable devices, surgical instruments, and technology solutions for spine, orthopedic, and neurosurgical procedures.
Why Do We Like GMED?
- Business is well-positioned no matter the global macroeconomic backdrop as its constant currency revenue growth averaged 58.8% over the past two years
- Earnings per share grew by 21.6% annually over the last five years, massively outpacing its peers
- Strong free cash flow margin of 16% enables it to reinvest or return capital consistently
Globus Medical is trading at $88.75 per share, or 22.1x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 Comfort Systems (+782% 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.
