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. That said, 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:
iRhythm (IRTC)
Trailing 12-Month Free Cash Flow Margin: 4.2%
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ: IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Does IRTC Give Us Pause?
- Modest revenue base of $657.2 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Cash burn makes us question whether it can achieve sustainable long-term growth
At $172.25 per share, iRhythm trades at 79.4x forward EV-to-EBITDA. If you’re considering IRTC for your portfolio, see our FREE research report to learn more.
Cisco (CSCO)
Trailing 12-Month Free Cash Flow Margin: 23.5%
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ: CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Are We Hesitant About CSCO?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Free cash flow margin shrank by 6.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Cisco’s stock price of $68.20 implies a valuation ratio of 17x forward P/E. Read our free research report to see why you should think twice about including CSCO in your portfolio.
One Stock to Watch:
Booz Allen Hamilton (BAH)
Trailing 12-Month Free Cash Flow Margin: 8.3%
With roots dating back to 1914 and deep ties to nearly all U.S. cabinet-level departments, Booz Allen Hamilton (NYSE: BAH) provides management consulting, technology services, and cybersecurity solutions primarily to U.S. government agencies and military branches.
Why Are We Positive On BAH?
- Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 10.7% over the past two years
- Economies of scale give it more fixed cost leverage than its smaller competitors
- Share buybacks catapulted its annual earnings per share growth to 13.5%, which outperformed its revenue gains over the last five years
Booz Allen Hamilton is trading at $100.45 per share, or 15.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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