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 excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
Atkore (ATKR)
Trailing 12-Month Free Cash Flow Margin: 10.4%
Protecting the things that power our world, Atkore (NYSE: ATKR) designs and manufactures electrical safety products.
Why Do We Avoid ATKR?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Free cash flow margin dropped by 7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Diminishing returns on capital suggest its earlier profit pools are drying up
Atkore’s stock price of $63.86 implies a valuation ratio of 12.4x forward P/E. If you’re considering ATKR for your portfolio, see our FREE research report to learn more.
United Airlines (UAL)
Trailing 12-Month Free Cash Flow Margin: 6.4%
Founded in 1926, United Airlines Holdings (NASDAQ: UAL) operates a global airline network, providing passenger and cargo air transportation services across domestic and international routes.
Why Is UAL Risky?
- Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
- Operating margin is anticipated to remain the same over the next year
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 5.4 percentage points over the next year
United Airlines is trading at $110.40 per share, or 9.3x forward P/E. Read our free research report to see why you should think twice about including UAL in your portfolio.
One Stock to Buy:
Astronics (ATRO)
Trailing 12-Month Free Cash Flow Margin: 6.1%
Integrating power outlets into many Boeing aircraft, Astronics (NASDAQ: ATRO) is a provider of technologies and services to the global aerospace, defense, and electronics industries.
Why Are We Backing ATRO?
- Annual revenue growth of 12.9% over the past two years was outstanding, reflecting market share gains this cycle
- Free cash flow margin jumped by 10.4 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 $50.78 per share, Astronics trades at 22.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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