A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 reinvests wisely to drive long-term success and two that may struggle to keep up.
Two Industrials Stocks to Sell:
Rockwell Automation (ROK)
Trailing 12-Month Free Cash Flow Margin: 12%
One of the first companies to address industrial automation, Rockwell Automation (NYSE: ROK) sells products that help customers extract more efficiency from their machinery.
Why Do We Avoid ROK?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Free cash flow margin dropped by 6.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $238.84 per share, Rockwell Automation trades at 24.5x forward price-to-earnings. Read our free research report to see why you should think twice about including ROK in your portfolio.
BrightView (BV)
Trailing 12-Month Free Cash Flow Margin: 4.8%
An official field consultant for Major League Baseball, BrightView (NYSE: BV) offers landscaping design, development, and maintenance.
Why Do We Pass on BV?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.8% annually over the last two years
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Underwhelming 2% return on capital reflects management’s difficulties in finding profitable growth opportunities
BrightView’s stock price of $13.59 implies a valuation ratio of 15.3x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than BV.
One Industrials Stock to Buy:
AZEK (AZEK)
Trailing 12-Month Free Cash Flow Margin: 11.7%
With a significant portion of its products made from recycled materials, AZEK (NYSE: AZEK) designs and manufactures goods for outdoor living spaces.
Why Are We Bullish on AZEK?
- Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 10.7% over the past two years
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share repurchases over the last two years enabled its annual earnings per share growth of 41.3% to outpace its revenue gains
AZEK is trading at $48.56 per share, or 33.2x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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 9 Market-Beating Stocks. 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.
