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 are two cash-producing companies that reinvest wisely to drive long-term success and one that may face some trouble.
One Stock to Sell:
Kforce (KFRC)
Trailing 12-Month Free Cash Flow Margin: 4.6%
With nearly 60 years of matching skilled professionals with the right opportunities, Kforce (NYSE:KFRC) is a professional staffing company that specializes in placing technology and finance experts with businesses on both temporary and permanent bases.
Why Do We Think KFRC Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 9.8% annually over the last two years
- Earnings per share fell by 11.7% annually over the last five years while its revenue was flat, showing each sale was less profitable
- Eroding returns on capital suggest its historical profit centers are aging
Kforce’s stock price of $41.89 implies a valuation ratio of 16.5x forward P/E. If you’re considering KFRC for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Dick's (DKS)
Trailing 12-Month Free Cash Flow Margin: 2.6%
Started as a hunting supply store, Dick’s Sporting Goods (NYSE:DKS) is a retailer that sells merchandise for traditional sports as well as for fitness and outdoor activities.
Why Do We Like DKS?
- Comparable store sales rose by 4% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- Earnings per share have comfortably outperformed the peer group average over the last six years, increasing by 27.4% annually
- Industry-leading 24.5% return on capital demonstrates management’s skill in finding high-return investments
Dick's is trading at $183.49 per share, or 12.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Lululemon (LULU)
Trailing 12-Month Free Cash Flow Margin: 12.2%
Originally serving yogis and hockey players, Lululemon (NASDAQ:LULU) is a designer, distributor, and retailer of athletic apparel for men and women.
Why Is LULU a Good Business?
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 6.6% over the past two years
- Unique assortment of products and pricing power lead to a best-in-class gross margin of 58.9%
- Robust free cash flow margin of 14.8% gives it many options for capital deployment
At $258.88 per share, Lululemon trades at 17x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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.