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:
Hilton (HLT)
Trailing 12-Month Free Cash Flow Margin: 16.8%
Founded in 1919, Hilton Worldwide (NYSE: HLT) is a global hospitality company with a portfolio of hotel brands.
Why Do We Think HLT Will Underperform?
- Revenue per room has disappointed over the past two years due to weaker trends in its daily rates and occupancy levels
- Free cash flow margin is expected to remain in place over the coming year
- Underwhelming 26.2% return on capital reflects management’s difficulties in finding profitable growth opportunities
Hilton’s stock price of $332.12 implies a valuation ratio of 36.3x forward P/E. If you’re considering HLT for your portfolio, see our FREE research report to learn more.
Itron (ITRI)
Trailing 12-Month Free Cash Flow Margin: 16.2%
Founded by a small group of engineers who wanted to build a more efficient way to read utility meters, Itron (NASDAQ: ITRI) offers energy and water management products for the utility industry, municipalities, and industrial customers.
Why Do We Think Twice About ITRI?
- Annual revenue growth of 1.7% over the last five years was below our standards for the industrials sector
- Estimated sales growth of 2.1% for the next 12 months implies demand will slow from its two-year trend
- ROIC of 6.6% reflects management’s challenges in identifying attractive investment opportunities
At $96.35 per share, Itron trades at 15.6x forward P/E. Dive into our free research report to see why there are better opportunities than ITRI.
One Stock to Buy:
Natera (NTRA)
Trailing 12-Month Free Cash Flow Margin: 5%
Founded in 2003 as Gene Security Network before rebranding in 2012, Natera (NASDAQ: NTRA) develops and commercializes genetic tests for prenatal screening, cancer detection, and organ transplant monitoring using its proprietary cell-free DNA technology.
Why Is NTRA a Good Business?
- Products are reaching more customers as its tests processed averaged 19.5% growth over the past two years
- Adjusted operating profits and efficiency rose over the last two years as it benefited from some fixed cost leverage
- Free cash flow margin is now positive, showing the company has crossed a key inflection point
Natera is trading at $214.44 per share, or 10.9x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
