Cash-generating companies often have the flexibility to invest, return capital to shareholders, or navigate downturns. The best of these businesses not only accumulate cash but deploy it strategically for growth.
Even among businesses with healthy cash flow, only a select few maximize its potential, and we’re here to pinpoint them. That said, here are three cash-producing companies that excel at turning cash into shareholder value.
Comfort Systems (FIX)
Trailing 12-Month Free Cash Flow Margin: 13.7%
Formed through the merger of 12 companies, Comfort Systems (NYSE: FIX) provides mechanical and electrical contracting services.
Why Are We Bullish on FIX?
- Demand is greater than supply as the company’s 53.1% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill
- Free cash flow margin increased by 9.5 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Returns on capital are climbing as management makes more lucrative bets
At $1,978 per share, Comfort Systems trades at 46.5x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Moody's (MCO)
Trailing 12-Month Free Cash Flow Margin: 34.9%
Founded in 1900 during America's railroad boom when investors needed reliable information on bond risks, Moody's (NYSE: MCO) provides credit ratings, risk assessment tools, and analytical solutions that help organizations evaluate financial risks and make informed investment decisions.
Why Are We Backing MCO?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 12.4% annual sales growth over the last two years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 22.5% exceeded its revenue gains over the last two years
- ROE punches in at 59.3%, illustrating management’s expertise in identifying profitable investments
Moody’s stock price of $429.50 implies a valuation ratio of 25.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Arthur J. Gallagher (AJG)
Trailing 12-Month Free Cash Flow Margin: 12.5%
Founded in 1927 and operating in approximately 130 countries through direct operations and correspondent networks, Arthur J. Gallagher (NYSE: AJG) provides insurance brokerage, reinsurance, consulting, and third-party claims settlement services to businesses and individuals worldwide.
Why Will AJG Outperform?
- Annual revenue growth of 19.1% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings per share grew by 18.5% annually over the last five years and trumped its peers
- AJG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Arthur J. Gallagher is trading at $199.94 per share, or 14.4x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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