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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, 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: 10.8%
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 Does ESAB Fall Short?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Anticipated sales growth of 3% for the next year implies demand will be shaky
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 4.4% annually
ESAB is trading at $122.62 per share, or 23.2x forward P/E. Dive into our free research report to see why there are better opportunities than ESAB.
Genpact (G)
Trailing 12-Month Free Cash Flow Margin: 12.3%
Originally spun off from General Electric in 2005 to provide business process services, Genpact (NYSE: G) is a global professional services firm that helps businesses transform their operations through digital technology, AI, and data analytics solutions.
Why Is G Not Exciting?
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.6%
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 9.4% annually
- 4 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
Genpact’s stock price of $44.80 implies a valuation ratio of 12.5x forward P/E. Check out our free in-depth research report to learn more about why G doesn’t pass our bar.
One Stock to Watch:
Upwork (UPWK)
Trailing 12-Month Free Cash Flow Margin: 25.5%
Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ: UPWK) is an online platform where businesses and independent professionals connect to get work done.
Why Could UPWK Be a Winner?
- Monetization efforts are paying off as its average revenue per customer has grown by 8.3% annually over the last two years
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 395% annually, topping its revenue gains
- Free cash flow margin increased by 27 percentage points over the last few years, giving the company more capital to invest or return to shareholders
At $13.60 per share, Upwork trades at 10.1x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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
