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 are two cash-producing companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
CoStar (CSGP)
Trailing 12-Month Free Cash Flow Margin: 4.8%
With a research department that makes over 10,000 property updates daily to its 35-year-old database, CoStar Group (NASDAQ: CSGP) provides comprehensive real estate data, analytics, and online marketplaces for commercial and residential properties in the U.S. and U.K.
Why Are We Cautious About CSGP?
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.6% annually while its revenue grew
- Free cash flow margin dropped by 17.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
CoStar’s stock price of $33.35 implies a valuation ratio of 23.1x forward P/E. Check out our free in-depth research report to learn more about why CSGP doesn’t pass our bar.
Two Stocks to Watch:
ANI Pharmaceuticals (ANIP)
Trailing 12-Month Free Cash Flow Margin: 20.7%
With a diverse portfolio of 116 pharmaceutical products and a growing rare disease platform, ANI Pharmaceuticals (NASDAQ: ANIP) develops, manufactures, and markets branded and generic prescription pharmaceuticals, with a focus on rare disease treatments.
Why Could ANIP Be a Winner?
- Annual revenue growth of 33.6% over the past two years was outstanding, reflecting market share gains this cycle
- Free cash flow margin jumped by 38.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Improving returns on capital suggest its past investments are beginning to deliver value
At $80.80 per share, ANI Pharmaceuticals trades at 1.5x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
TransUnion (TRU)
Trailing 12-Month Free Cash Flow Margin: 14.7%
One of the three major credit bureaus in the United States alongside Equifax and Experian, TransUnion (NYSE: TRU) is a global information and insights company that provides credit reports, fraud prevention tools, and data analytics to help businesses make decisions and consumers manage their financial health.
Why Do We Like TRU?
- Annual revenue growth of 11.6% over the last five years was superb and indicates its market share increased during this cycle
- Estimated revenue growth of 11.3% for the next 12 months implies its momentum over the last two years will continue
- Strong free cash flow margin of 10.1% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
TransUnion is trading at $68.90 per share, or 14.3x 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
