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 face some trouble.
Two Stocks to Sell:
Asure Software (ASUR)
Trailing 12-Month Free Cash Flow Margin: 5.5%
Operating in the often-overlooked smaller metropolitan markets where HR expertise can be scarce, Asure Software (NASDAQ: ASUR) provides cloud-based human capital management software and services that help small and medium-sized businesses manage payroll, taxes, time tracking, and HR compliance.
Why Do We Think ASUR Will Underperform?
- Muted 4% annual revenue growth over the last two years shows its demand lagged behind its software peers
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $9.99 per share, Asure Software trades at 1.8x forward price-to-sales. To fully understand why you should be careful with ASUR, check out our full research report (it’s free).
Super Group (SGHC)
Trailing 12-Month Free Cash Flow Margin: 16.1%
With betting operations spanning 20 jurisdictions and attracting nearly 5 million monthly customers, Super Group (NYSE: SGHC) operates global online sports betting and gaming platforms through its two primary offerings: the Betway sports betting brand and Spin multi-brand casino portfolio.
Why Are We Out on SGHC?
- Customer growth was choppy over the past two years, suggesting that increasing competition is causing challenges in landing new contracts
- Incremental sales over the last four years were much less profitable as its earnings per share fell by 6% annually while its revenue grew
- Projected 1.5 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
Super Group is trading at $9.97 per share, or 14.5x forward P/E. Read our free research report to see why you should think twice about including SGHC in your portfolio.
One Stock to Watch:
Costco (COST)
Trailing 12-Month Free Cash Flow Margin: 3.2%
Designed to be a one-stop shop for the suburban consumer, Costco (NASDAQ: COST) is a membership-only retail chain that sells groceries, apparel, toys, and household items, often in bulk quantities.
Why Does COST Catch Our Eye?
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 5.9% over the past two years
- Enormous revenue base of $280.4 billion compensates for its low gross margin and provides significant leverage in supplier negotiations
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are climbing as it finds even more attractive growth opportunities
Costco’s stock price of $962.49 implies a valuation ratio of 46.5x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
