A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
ESAB (ESAB)
Trailing 12-Month Free Cash Flow Margin: 8.5%
Having played a significant role in the construction of the iconic Sydney Opera House, ESAB (NYSE: ESAB) manufactures and sells welding and cutting equipment for numerous industries.
Why Do We Steer Clear of ESAB?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- 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
ESAB’s stock price of $133.98 implies a valuation ratio of 23.7x forward P/E. If you’re considering ESAB for your portfolio, see our FREE research report to learn more.
RTX (RTX)
Trailing 12-Month Free Cash Flow Margin: 9%
Originally focused on refrigeration technology, Raytheon (NSYE:RTX) provides a a variety of products and services to the aerospace and defense industries.
Why Does RTX Give Us Pause?
- The company has faced growth challenges as its 6.5% annual revenue increases over the last five years fell short of other industrials companies
- Estimated sales growth of 5.6% for the next 12 months implies demand will slow from its two-year trend
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $200.58 per share, RTX trades at 28.8x forward P/E. Read our free research report to see why you should think twice about including RTX in your portfolio.
One Stock to Watch:
WD-40 (WDFC)
Trailing 12-Month Free Cash Flow Margin: 12.6%
Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQ: WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.
Why Does WDFC Catch Our Eye?
- Products command premium prices and result in a premier gross margin of 54.5%
- WDFC is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
- Industry-leading 26.2% return on capital demonstrates management’s skill in finding high-return investments, and its rising returns show it’s making even more lucrative bets
WD-40 is trading at $239.61 per share, or 38x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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.
