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. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
Gap (GAP)
Trailing 12-Month Free Cash Flow Margin: 6.2%
Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE: GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.
Why Are We Hesitant About GAP?
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Same-store sales growth averaged 2% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Gap is trading at $23.62 per share, or 9.4x forward P/E. To fully understand why you should be careful with GAP, check out our full research report (it’s free).
Two Stocks to Buy:
Vertiv (VRT)
Trailing 12-Month Free Cash Flow Margin: 25.7%
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Should You Buy VRT?
- Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 24.2% over the past two years
- Free cash flow margin jumped by 32.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Rising returns on capital show management is finding more attractive investment opportunities
Vertiv’s stock price of $246.40 implies a valuation ratio of 32.1x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
UL Solutions (ULS)
Trailing 12-Month Free Cash Flow Margin: 13.9%
Founded in 1894 as a response to the growing dangers of electricity in American homes and businesses, UL Solutions (NYSE: ULS) provides testing, inspection, and certification services that help companies ensure their products meet safety, security, and sustainability standards.
Why Will ULS Beat the Market?
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 23% outpaced its revenue gains
- Free cash flow margin increased by 6.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
At $67.16 per share, UL Solutions trades at 28.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
