While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
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 excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
F5 (FFIV)
Trailing 12-Month Free Cash Flow Margin: 29.9%
Originally named after the F5 tornado, the most powerful on the meteorological scale, F5 (NASDAQ: FFIV) provides security and delivery solutions that protect applications across cloud, data center, and edge environments for large organizations.
Why Does FFIV Give Us Pause?
- Customers were hesitant to make long-term commitments to its software as its 3.3% average ARR growth over the last year was sluggish
- Estimated sales growth of 5% for the next 12 months implies demand will slow from its two-year trend
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
At $345.53 per share, F5 trades at 5.8x forward price-to-sales. Check out our free in-depth research report to learn more about why FFIV doesn’t pass our bar.
Sonos (SONO)
Trailing 12-Month Free Cash Flow Margin: 8.1%
A pioneer in connected home audio systems, Sonos (NASDAQ: SONO) offers a range of premium wireless speakers and sound systems.
Why Should You Dump SONO?
- Annual sales declines of 1.4% for the past five years show its products and services struggled to connect with the market
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 9.3% annually, worse than its revenue
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.2% for the last two years
Sonos is trading at $14.54 per share, or 1.1x forward price-to-sales. If you’re considering SONO for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Zurn Elkay (ZWS)
Trailing 12-Month Free Cash Flow Margin: 18.4%
Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE: ZWS) provides water management solutions to various industries.
Why Could ZWS Be a Winner?
- Offerings are difficult to replicate at scale and lead to a premier gross margin of 42.6%
- Operating margin expanded by 3.7 percentage points over the last five years as it scaled and became more efficient
- Strong free cash flow margin of 15.1% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
Zurn Elkay’s stock price of $51.81 implies a valuation ratio of 28.5x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum - both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks - FREE. Get Our Strong Momentum Stocks for Free HERE.
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.
