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 excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
B&G Foods (BGS)
Trailing 12-Month Free Cash Flow Margin: 5.4%
Started as a small grocery store in New York City, B&G Foods (NYSE:BGS) is an American packaged foods company with a diverse portfolio of more than 50 brands.
Why Are We Out on BGS?
- Annual sales declines of 2% for the past three years show its products struggled to connect with the market
- Sales were less profitable over the last three years as its earnings per share fell by 27.9% annually, worse than its revenue declines
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
B&G Foods’s stock price of $6.74 implies a valuation ratio of 10x forward P/E. If you’re considering BGS for your portfolio, see our FREE research report to learn more.
Maximus (MMS)
Trailing 12-Month Free Cash Flow Margin: 5.2%
With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE:MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.
Why Are We Cautious About MMS?
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- ROIC of 12.3% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $66.33 per share, Maximus trades at 10.7x forward P/E. Check out our free in-depth research report to learn more about why MMS doesn’t pass our bar.
One Stock to Watch:
ACV Auctions (ACVA)
Trailing 12-Month Free Cash Flow Margin: 4.9%
Founded in 2014, ACV Auctions (NASDAQ:ACVA) is an online auction marketplace for car dealers and wholesalers to buy and sell used cars.
Why Does ACVA Catch Our Eye?
- Marketplace Units have grown by 17% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- EBITDA margin expanded by 16.7 percentage points over the last few years as it scaled and became more efficient
- Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 28.1% annually
ACV Auctions is trading at $14.96 per share, or 30x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks That Overcame Trump’s 2018 Tariffs
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.