A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. 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:
Enphase (ENPH)
Trailing 12-Month Free Cash Flow Margin: 11.5%
The first company to successfully commercialize the solar micro-inverter, Enphase (NASDAQ: ENPH) manufactures software-driven home energy products.
Why Are We Bearish on ENPH?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Free cash flow margin shrank by 15.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital imply its previous profit engines are losing steam
Enphase is trading at $31.70 per share, or 16.6x forward P/E. To fully understand why you should be careful with ENPH, check out our full research report (it’s free).
Two stocks to buy:
Samsara (IOT)
Trailing 12-Month Free Cash Flow Margin: 13.8%
From sensors on vehicles to AI-powered cameras that help prevent accidents, Samsara (NYSE: IOT) is a cloud-based Internet of Things platform that helps businesses improve the safety, efficiency, and sustainability of their physical operations.
Why Should You Buy IOT?
- Ability to secure long-term commitments with customers is evident in its 29.5% ARR growth over the last year
- Forecasted revenue growth of 20.9% for the next 12 months indicates its momentum over the last two years is sustainable
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
At $42.98 per share, Samsara trades at 11.2x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Chord Energy (CHRD)
Trailing 12-Month Free Cash Flow Margin: 18.8%
Holding the largest acreage position in the Williston Basin, Chord Energy (NASDAQ: CHRD) drills for and produces crude oil, natural gas liquids, and natural gas in North Dakota's Williston Basin.
Why Is CHRD a Top Pick?
- Annual revenue growth of 24.8% over the past ten years was outstanding, reflecting market share gains this cycle
- Economies of scale gives it negotiating power with suppliers and fixed cost leverage when sales grow
- Strong free cash flow margin of 23.3% enables it to reinvest or return capital consistently
Chord Energy’s stock price of $150.94 implies a valuation ratio of 6.9x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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