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 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:
ZoomInfo (GTM)
Trailing 12-Month Free Cash Flow Margin: 35.9%
Operating a platform it calls "RevOS" - short for Revenue Operating System - ZoomInfo (NASDAQ: GTM) provides sales, marketing, and recruiting teams with business intelligence and analytics to identify prospects and deliver targeted outreach.
Why Is GTM Risky?
- Customers had second thoughts about committing to its platform over the last year as its billings plateaued
- Estimated sales decline of 5.9% for the next 12 months implies an even more challenging demand environment
- Projected 3.9 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
At $2.82 per share, ZoomInfo trades at 0.7x forward price-to-sales. Check out our free in-depth research report to learn more about why GTM doesn’t pass our bar.
Freshpet (FRPT)
Trailing 12-Month Free Cash Flow Margin: 4.1%
Standing out from typical processed pet foods, Freshpet (NASDAQ: FRPT) is a pet food company whose product portfolio includes natural meals and treats for dogs and cats.
Why Do We Think Twice About FRPT?
- Smaller revenue base of $1.14 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.6% for the last two years
- Low returns on capital reflect management’s struggle to allocate funds effectively
Freshpet is trading at $55.00 per share, or 37.3x forward P/E. Read our free research report to see why you should think twice about including FRPT in your portfolio.
One Stock to Buy:
LSI (LYTS)
Trailing 12-Month Free Cash Flow Margin: 6.2%
Enhancing commercial environments, LSI (NASDAQ: LYTS) provides lighting and display solutions for businesses and retailers.
Why Do We Love LYTS?
- Market share has increased this cycle as its 16.7% annual revenue growth over the last five years was exceptional
- Incremental sales over the last five years have been highly profitable as its earnings per share increased by 35.2% annually, topping its revenue gains
- Free cash flow margin jumped by 8.9 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
LSI’s stock price of $26.62 implies a valuation ratio of 19.1x 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
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
