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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one best left off your watchlist.
One Stock to Sell:
Opendoor (OPEN)
Trailing 12-Month Free Cash Flow Margin: 18.8%
Founded by real estate guru Eric Wu, Opendoor (NASDAQ: OPEN) offers a technology-driven, convenient, and streamlined process to buy and sell homes.
Why Do We Pass on OPEN?
- Performance surrounding its homes purchased has lagged its peers
- Projected 45.3 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
- Negative earnings profile makes it challenging to secure favorable financing terms from lenders
At $7.55 per share, Opendoor trades at 1.2x forward price-to-sales. To fully understand why you should be careful with OPEN, check out our full research report (it’s free for active Edge members).
Two Stocks to Watch:
Dynatrace (DT)
Trailing 12-Month Free Cash Flow Margin: 25.5%
With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE: DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.
Why Could DT Be a Winner?
- Impressive 19.5% annual revenue growth over the last two years indicates it’s winning market share
- Software is difficult to replicate at scale and leads to a stellar gross margin of 81.8%
- DT is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Dynatrace is trading at $44.16 per share, or 6.4x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Broadcom (AVGO)
Trailing 12-Month Free Cash Flow Margin: 41.6%
Originally the semiconductor division of Hewlett Packard, Broadcom (NASDAQ: AVGO) is a semiconductor conglomerate spanning wireless communications, networking, and data storage as well as infrastructure software focused on mainframes and cybersecurity.
Why Will AVGO Outperform?
- Impressive 30% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 76.1%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Broadcom’s stock price of $381.34 implies a valuation ratio of 45.2x 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.
High-Quality Stocks for All Market Conditions
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 9 Market-Beating Stocks. 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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