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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may struggle to keep up.
One Stock to Sell:
American Airlines (AAL)
Trailing 12-Month Free Cash Flow Margin: 2%
One of the ‘Big Four’ airlines in the US, American Airlines (NASDAQ: AAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Why Do We Think AAL Will Underperform?
- Sluggish trends in its revenue passenger miles suggest customers aren’t adopting its solutions as quickly as the company hoped
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
American Airlines’s stock price of $18.11 implies a valuation ratio of 7.8x forward EV-to-EBITDA. If you’re considering AAL for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Marvell Technology (MRVL)
Trailing 12-Month Free Cash Flow Margin: 19.1%
Moving away from a low margin storage device management chips in one of the biggest semiconductor business model pivots of the past decade, Marvell Technology (NASDAQ: MRVL) is a fabless designer of special purpose data processing and networking chips used by data centers, communications carriers, enterprises, and autos.
Why Do We Like MRVL?
- Impressive 22.9% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Projected revenue growth of 45.5% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Operating margin improvement of 19.8 percentage points over the last five years demonstrates its ability to scale efficiently
At $270.75 per share, Marvell Technology trades at 65.7x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Core & Main (CNM)
Trailing 12-Month Free Cash Flow Margin: 8%
Formerly a division of industrial distributor HD Supply, Core & Main (NYSE: CNM) is a provider of water, wastewater, and fire protection products and services.
Why Does CNM Stand Out?
- Market share has increased this cycle as its 14.7% annual revenue growth over the last five years was exceptional
- Performance over the past two years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin grew by 8.9 percentage points over the last five years, giving the company more chips to play with
Core & Main is trading at $45.88 per share, or 16.3x forward P/E. Is now a good 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%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. 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 (+1,326% 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.
