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. That said, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
Papa John's (PZZA)
Trailing 12-Month Free Cash Flow Margin: 4%
Founded by the eclectic John “Papa John” Schnatter, Papa John’s (NASDAQ: PZZA) is a globally recognized pizza delivery and carryout chain known for “better ingredients” and “better pizza”.
Why Do We Pass on PZZA?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Challenging supply chain dynamics and bad unit economics are reflected in its low gross margin of 12.1%
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 3.6 percentage points
At $42.39 per share, Papa John's trades at 24.9x forward P/E. Check out our free in-depth research report to learn more about why PZZA doesn’t pass our bar.
PepsiCo (PEP)
Trailing 12-Month Free Cash Flow Margin: 7.8%
With a history that goes back more than a century, PepsiCo (NASDAQ: PEP) is a household name in food and beverages today and best known for its flagship soda.
Why Do We Think Twice About PEP?
- Shrinking unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Estimated sales growth of 3.8% for the next 12 months is soft and implies weaker demand
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 2.4 percentage points
PepsiCo’s stock price of $146.93 implies a valuation ratio of 17.4x forward P/E. Dive into our free research report to see why there are better opportunities than PEP.
One Stock to Watch:
Grid Dynamics (GDYN)
Trailing 12-Month Free Cash Flow Margin: 6.7%
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Why Does GDYN Stand Out?
- Impressive 29.1% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Earnings per share have massively outperformed its peers over the last five years, increasing by 22.2% annually
- Improving returns on capital suggest its past investments are beginning to deliver value
Grid Dynamics is trading at $9.62 per share, or 22.2x forward P/E. Is now a good time to buy? See for yourself in our comprehensive 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 5 Growth Stocks for this month. 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-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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