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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
Proto Labs (PRLB)
Trailing 12-Month Free Cash Flow Margin: 10.1%
Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE: PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.
Why Are We Cautious About PRLB?
- Muted 4.4% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Subpar operating margin of 0.6% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Negative returns on capital show that some of its growth strategies have backfired
At $82.16 per share, Proto Labs trades at 37.1x forward P/E. Read our free research report to see why you should think twice about including PRLB in your portfolio.
United Natural Foods (UNFI)
Trailing 12-Month Free Cash Flow Margin: 1.1%
With a vast network of 55 distribution centers spanning approximately 30 million square feet of warehouse space, United Natural Foods (NYSE: UNFI) is North America's premier grocery wholesaler distributing natural, organic, and conventional products to over 30,000 retail locations across the US and Canada.
Why Should You Sell UNFI?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 1.2% over the last three years was below our standards for the consumer staples sector
- Gross margin of 13.4% is below its competitors, leaving less money to invest in areas like marketing and production facilities
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 20.9% annually
United Natural Foods’s stock price of $47.40 implies a valuation ratio of 15.2x forward P/E. Check out our free in-depth research report to learn more about why UNFI doesn’t pass our bar.
One Stock to Watch:
Veeva Systems (VEEV)
Trailing 12-Month Free Cash Flow Margin: 49.4%
Originally named "Verticals onDemand" before rebranding in 2009, Veeva Systems (NYSE: VEEV) provides cloud software, data solutions, and consulting services that help life sciences companies develop and bring products to market more efficiently.
Why Are We Fans of VEEV?
- Sound unit economics and 75% gross margin allow for higher marketing and R&D budgets versus competitors
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Healthy operating margin of 28.8% shows it’s a well-run company with efficient processes, and its profits increased over the last year as it scaled
Veeva Systems is trading at $253.00 per share, or 10.7x forward price-to-sales. Is now the right time to buy? Find out 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.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
