A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may struggle to keep up.
One Stock to Sell:
Mettler-Toledo (MTD)
Trailing 12-Month Free Cash Flow Margin: 22.7%
With roots dating back to the precision balance innovations of Swiss engineer Erhard Mettler, Mettler-Toledo (NYSE: MTD) manufactures precision weighing instruments, analytical equipment, and product inspection systems used in laboratories, industrial settings, and food retail.
Why Are We Cautious About MTD?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Projected sales growth of 3.4% for the next 12 months suggests sluggish demand
- Static adjusted operating margin over the last two years shows it couldn’t become more efficient
Mettler-Toledo is trading at $1,100 per share, or 25.3x forward P/E. Read our free research report to see why you should think twice about including MTD in your portfolio.
Two Stocks to Watch:
Bill.com (BILL)
Trailing 12-Month Free Cash Flow Margin: 20.9%
Started by René Lacerte in 2006 after selling his previous payroll and accounting software company PayCycle to Intuit, Bill.com (NYSE: BILL) is a software as a service platform that aims to make payments and billing processes easier for small and medium-sized businesses.
Why Could BILL Be a Winner?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 17.6% over the last year
- Prominent and differentiated software culminates in a best-in-class gross margin of 85.1%
- Operating margin improvement of 12.7 percentage points over the last year demonstrates its ability to scale efficiently
Bill.com’s stock price of $46.99 implies a valuation ratio of 3.1x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Tractor Supply (TSCO)
Trailing 12-Month Free Cash Flow Margin: 4.1%
Started as a mail-order tractor parts business, Tractor Supply (NASDAQ: TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.
Why Are We Positive On TSCO?
- Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
- Forecasted revenue growth of 5.6% for the next 12 months indicates its momentum over the last six years is sustainable
- Industry-leading 35.2% return on capital demonstrates management’s skill in finding high-return investments
At $50.49 per share, Tractor Supply trades at 23x forward P/E. Is now a good time to buy? See for yourself in our comprehensive 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.
