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.
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 that may face some trouble.
Two Stocks to Sell:
Medifast (MED)
Trailing 12-Month Free Cash Flow Margin: 2.5%
Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE: MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.
Why Is MED Risky?
- Products have few die-hard fans as sales have declined by 30.3% annually over the last three years
- Overall productivity fell over the last year as its plummeting sales were accompanied by a decline in its operating margin
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
Medifast is trading at $13.25 per share, or 0.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MED.
AMN Healthcare Services (AMN)
Trailing 12-Month Free Cash Flow Margin: 8%
With a network of thousands of healthcare professionals ranging from nurses to physicians to executives, AMN Healthcare (NYSE: AMN) provides healthcare workforce solutions including temporary staffing, permanent placement, and technology platforms for hospitals and healthcare facilities across the United States.
Why Do We Steer Clear of AMN?
- Declining travelers on assignment over the past two years indicate demand is soft and that the company may need to revise its strategy
- Forecasted revenue decline of 11.7% for the upcoming 12 months implies demand will fall even further
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $21.49 per share, AMN Healthcare Services trades at 13.9x forward P/E. Read our free research report to see why you should think twice about including AMN in your portfolio.
One Stock to Buy:
Doximity (DOCS)
Trailing 12-Month Free Cash Flow Margin: 42.2%
Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.
Why Do We Love DOCS?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 20.3% over the last year
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- DOCS is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Doximity’s stock price of $59.34 implies a valuation ratio of 19.4x forward price-to-sales. Is now the time to initiate a position? 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 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.
