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. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.
Two Stocks to Sell:
Wynn Resorts (WYNN)
Trailing 12-Month Free Cash Flow Margin: 14.1%
Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ: WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.
Why Does WYNN Give Us Pause?
- Sales trends were unexciting over the last five years as its 1.5% annual growth was below the typical consumer discretionary company
- Projected sales decline of 1% for the next 12 months points to a tough demand environment ahead
- ROIC of 1.6% reflects management’s challenges in identifying attractive investment opportunities
At $74.06 per share, Wynn Resorts trades at 15.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than WYNN.
ScanSource (SCSC)
Trailing 12-Month Free Cash Flow Margin: 8.1%
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
Why Do We Pass on SCSC?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 10.4% annually over the last two years
- Sales were less profitable over the last two years as its earnings per share fell by 11.7% annually, worse than its revenue declines
- ROIC of 7.8% reflects management’s challenges in identifying attractive investment opportunities
ScanSource is trading at $33.32 per share, or 8.7x forward price-to-earnings. Read our free research report to see why you should think twice about including SCSC in your portfolio.
One Stock to Watch:
Intuit (INTU)
Trailing 12-Month Free Cash Flow Margin: 32.8%
Created in 1983 when founder Scott Cook watched his wife struggle to reconcile the family's checkbook, Intuit provides tax and accounting software for small and medium-sized businesses.
Why Are We Fans of INTU?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 15% over the last year
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Robust free cash flow margin of 32.8% gives it many options for capital deployment
Intuit’s stock price of $578.88 implies a valuation ratio of 8.6x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
