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 is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.
Two Stocks to Sell:
Keysight (KEYS)
Trailing 12-Month Free Cash Flow Margin: 23.8%
Spun off from Hewlett-Packard in 2014, Keysight (NYSE: KEYS) offers electronic measurement products for use in various sectors.
Why Are We Hesitant About KEYS?
- New orders were hard to come by as its average backlog growth of 1.1% over the past two years underwhelmed
- Sales over the last two years were less profitable as its earnings per share fell by 7.3% annually while its revenue was flat
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Keysight is trading at $208.90 per share, or 26.5x forward P/E. If you’re considering KEYS for your portfolio, see our FREE research report to learn more.
Kimball Electronics (KE)
Trailing 12-Month Free Cash Flow Margin: 7.9%
Founded in 1961, Kimball Electronics (NYSE: KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Why Is KE Risky?
- Annual sales declines of 10.8% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share have dipped by 2.4% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.1% for the last five years
Kimball Electronics’s stock price of $30.37 implies a valuation ratio of 24.7x forward P/E. To fully understand why you should be careful with KE, check out our full research report (it’s free for active Edge members).
One Stock to Watch:
Palo Alto Networks (PANW)
Trailing 12-Month Free Cash Flow Margin: 38.6%
Founded in 2005 by security visionary Nir Zuk who sought to reimagine firewall technology, Palo Alto Networks (NASDAQ: PANW) provides AI-powered cybersecurity platforms that protect organizations' networks, clouds, and endpoints from sophisticated threats.
Why Are We Positive On PANW?
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Healthy operating margin of 13.2% shows it’s a well-run company with efficient processes, and it turbocharged its profits by achieving some fixed cost leverage
- Strong free cash flow margin of 38.6% enables it to reinvest or return capital consistently
At $191.19 per share, Palo Alto Networks trades at 12.4x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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